This has been a tough year for mortgage brokers. Finding decent deals for first-time buyers or those with little equity in their homes is one of the biggest challenges we face as lenders shy away from what they regard as higher-risk borrowers.
I can see why, as falling property prices mean homes are not such good security for lenders. But one of my biggest wishes is a return of higher loans to value on purchase and remortgage deals.
If prices have fallen by 15 per cent since their peak in 2007, anyone who bought with less than a 40 per cent deposit two years ago will not now qualify for anything at 60 or even 75 per cent LTV, in other words, the majority of deals. Luckily, interest rates have fallen so significantly that if a client cannot remortgage and is stuck on their lender’s “go to” rate, it is not the end of the world. But with many lenders not passing on the base rate reduction in full, reverting to the standard variable rate may not be as satisfactory.
What can be done about the lack of higher LTVs? There are some products available at 90 per cent but lenders do not really have an appetite for them – not only are they few and far between but rates are also significantly higher.
Abbey has a two-year fix through brokers at 4.19 per cent for those with a 40 per cent deposit, whereas HSBC’s two-year fix for those with a 10 per cent deposit (which is not available through brokers anyway) has a much higher rate of 6.99 per cent. Although the rate is a lot higher, at least there is an option, which not all lenders are prepared to offer.
How can this be resolved? Well, some Government innovation would be welcome, perhaps underwriting the top slice of borrowing with some sort of mortgage indemnity so that the lender is not fully exposed if house prices fall by more than another 10 per cent. This will give lenders some comfort about lending at this level. I am not advocating a return to lending at 125 or even 100 per cent LTV but a wide choice of deals at 90 or even 95 per cent at rates borrowers can afford.
Falling interest rates mean less incentive for savers, which is bad news for lenders relying on savings. Some sort of return to the securitisation market is necessary to boost lending. The Govern-ment needs to respond urgently on this.
I would also like to see real progress from lenders on repossessions. At the very least, all lenders should agree to wait at least six months before repossessing a home. I would also like to see the pace of the decline in property prices start to slow and bottom out at some point next year.
I know it is unlikely that I will get all of these but as many as possible would be very welcome.
Mark Harris is managing director at Savills Private Finance