"Demand – particularly from first-time buyers but also other borrowers – for high LTV products remains very high"
Just prior to Christmas, the Government announced it would be extending its Mortgage Guarantee Scheme which was due to finish at the end of 2022, but I suspect with some industry cajoling, will now run for another full year until the end of 2023.
Who knows what might happen over the next 12 months? Perhaps we will find ourselves in the early part of 2024 talking about a further extension?
Certainly, in the grand scheme of things, the Scheme might be perceived to have supported only a very small number of loans since it was launched back in April 2021, however I think this damns it with faint praise, considering the situation back then for high LTV mortgage provision, specifically those accessible for first-time buyers.
As we know, back then you could count the number of 95% LTV mortgages available on one hand, such was the lack of confidence lenders had in supplying these products, and the introduction of the Government’s Scheme undoubtedly acted as a much-needed catalyst in terms of getting more product out into the marketplace.
Now, it’s highly likely that over time, lenders would have reached a more comfortable level with high LTV mortgages, would have recognised the strong demand for such products, and would have eased themselves back into the market, but it certainly wouldn’t have happened as quickly or effectively without the Government’s intervention.
However, we are in a somewhat different situation currently, albeit one where the market is still trying to solve the issues raised by the ‘Mini Budget’ which hit the provision of high LTV mortgages, specifically fixed-rate products, harder than many other parts of the market.
That said, the tide has turned and in recent months we have seen a growing number of high LTV products, many of which are not utilising the Government Guarantee Scheme and are instead utilising AmTrust’s private insurance products as offered by Qualis Credit Risk, or are choosing to keep the risk on their own balance sheets.
Certainly, as time has progressed, and lenders have compared the terms available from the Government to private insurance, there has been an understanding that they could secure greater flexibility and a cheaper premium by ‘going private’, which is perhaps why the take-up of the Scheme has diminished somewhat.
As mentioned, this is not to diminish its significance in any way, and if by extending, it continues to give the confidence lenders need to make further forays into high LTV mortgage provision, then it is probably a worthwhile exercise.
However, at some point in the very near future, the industry will have to stand on its own two feet, and I do think this could have happened now. Certainly, for those seeking risk mitigation for their high LTV mortgage proposition, there are (as mentioned) a number of private alternatives which will be much more nuanced and will mesh perfectly with what the lender is seeking to achieve.
These are bespoke private insurance products rather than the one size fits all approach that the Government has to offer, and I therefore expect to see more lenders opting for the former as the year progresses.
What can be seen clearly from this of course, is that demand – particularly from first-time buyers but also other borrowers – for high LTV products remains very high. In a year in which house prices are likely to continue to track downwards, while we have mortgage rates looking like they are also heading back in this direction, those first-timers who can square the affordability circle, may well be in a far better position to purchase than they were.
Certainly, after the Autumn debacle, it looks like a much more benign mortgage and property market environment, and there may be a greater supply of property available to first-timers, particularly if smaller-scale landlords continue to feel they can’t make their investment properties work and decide to sell up.
Overall, the outlook for first-timers and those seeking high LTV products is much better than it was just a few short months ago, and lenders have ample options in terms of meeting their appetite to lend in this sector, securing the business they want, and allowing a greater number of individuals to get into the properties they want to own.
