The rise of high loan to value mortgages

High loan to value mortgages have been increasing. Analysts from the investment bank, Jefferies, have upgraded the UK residential property sector as “data points to a stronger pre-election housing market than we had anticipated”. This is supported by a notable increase in high loan to value mortgages, despite a cooling housing market overall.

Why the rise?

This upgrade to the UK residential property sector is a response to early indicators that the housing market is picking up, despite political uncertainty leading up to the election. One factor that may have contributed to this from the bottom of the spectrum up is the help to buy scheme which has helped the new-build sector perform beyond what was expected.

Anthony Codling, property analyst at Jefferies says, ‘Election fears have not yet materialised. We had thought that the UK housing market would at best pause for breath and worst decline significantly ahead of May’s General Election and that profit-taking following share price performance in Q4 2014 would be the theme of Q1 2015. We were wrong”.

Islay Robinson, CEO at Enness Private Clients says, “At Enness we have similarly witnessed a significant increase in high loan to value mortgage applications during this period as well, indicating that the market is stable, despite the uncertainty of the road ahead. As ever, seasonal factors continue to broadly effect the market in slowing house purchase in January and February. Yet, as we have come into March, we are seeing significant growth. This research reveals a high loan to value mortgage appetite both from consumer and lender and an encouraging confidence in the UK market whatever the outcome”.

This increase is also partially indicative that people now need a broker more than ever to negotiate their high loan to value mortgage on their behalf as presentation is evermore key. It furthermore demonstrates that although the election outcome is yet to be determined the key danger points have now passed.

Another factor that has sustained these high loan to value mortgage applications is that the supply of credit is increasing. Earlier this week the Bank of England revealed that “risky” mortgages are back on the rise. Whilst they are taking measures to rein these in before people borrow too much this is a positive sign for borrowers that the lending market is becoming less rigid – particularly after last year’s tightening after the Mortgage Market Review (MMR).

What does this mean for you?

Increased distribution in the high loan to value mortgage sphere and an assurance that the market in this niche remains healthy, despite socio-political factors occurring in the background. Empirically, housing market activity tends to pick up following an election no matter what the outcome so this research is encouraging.

Once the election is out the way we expect to see a further upturn of activity in the high loan to value mortgage market. Lenders have a huge appetite to lend and the fact that these levels have been hardly subdued at the beginning of the year is indicative that post-election there should be a lot of appealing rates emerging as the high loan to value mortgage market expands even more; catering to the consumer.





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