Mortgages

Mortgages above 90% LTV reach post-crisis high: BoE

The proportion of lending at high loan to income ratios was 46.1%, 0.7 percentage points higher than a year earlier.

Rozi Jones
|
12th September 2019
bank of england boe
"The average rate for a 95% LTV two year fixed rate product is now just 2.95%, nearly a whole percentage point cheaper than at the same time last year."

Mortgages with LTV ratios above 90% took a 5.5% share of all lending in Q2 - the highest since Q4 2008, according to the latest MLAR data from the Bank of England.

The Bank's Mortgage Lenders and Administrators Return (MLAR) statistics are aggregated from the returns from around 340 regulated mortgage lenders and administrators, providing data on their mortgage lending activities.

The data shows that lending for house purchase accounted for 50.5% of total gross mortgage advances in Q2. Of this, 21.3% was to first-time buyers, similar levels to a year earlier.

The proportion of lending at high loan to income ratios (greater than four times the value of annual income for a single borrower or greater than three times annual income for joint borrowers) was 46.1%, 0.7 percentage points higher than a year earlier.

The share of gross mortgage lending for buy-to-let purposes was 13.1%, also in line with a year earlier.

Simon Checkley, managing director at Private Finance, commented: “The popularity of mortgages with a loan-to-value exceeding 90% are at their highest point since the 2008 financial crash. These products have been vital in enabling those with smaller deposits to purchase their first home, and are therefore a key driver in creating a new generation of homeowners.

“Those concerned that borrowers might be overstretching themselves should take comfort in the fact that while high LTV products do come with a slight premium, in today’s low rate market, they’re incredibly affordable. The average rate for a 95% LTV two year fixed rate product is now just 2.95%, nearly a whole percentage point cheaper than at the same time last year.

“It’s always preferable for borrowers to opt for a product at the lowest LTV possible to secure the best rate and minimise the amount of interest repaid. However, it’s not always realistic to save a hefty deposit, so many prospective first-time buyers will be encouraged by the flurry of high LTV products that have launched onto the market, giving those otherwise locked out of homeownership their first step onto property the ladder.”

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