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Lloyds most exposed to “vulnerable” high LTV borrowers

Lloyds Banking Group is the most exposed of all of the major UK banks to vulnerable high loan-to-value borrowers, according to the Bank of England.

According to the BoE, 60 per cent of LBG’s £345bn mortgage book is classed as high LTV – mortgages between 70 and 90 per cent of the property’s value – or very high – 90 per cent and above. The BoE says 32 per cent of LBG’s mortgage book is classed as very high LTV.

Royal Bank of Scotland has the second highest exposure, with 27 per cent of its book classed as high LTV and 12 per cent classed as very high. Santander UK has 22 per cent of its mortgage book classed as high LTV and 11 per cent as very high. Nationwide has 21 per cent of its borrowers on high LTV mortgages and 7 per cent on very high LTV mortgages.

Barclays has 15 per cent at high LTV and 6 per cent at very high LTV and HSBC has an 8 per cent exposure to high LTV mortgages. No data was available for very high LTV mortgages for HSBC.

In its latest Financial Stability report, the BoE says: “Significant variation in the proportion of high LTV borrowers across banks suggests that exposures to vulnerable households are likely to be concentrated in a few banks.”


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. 27 June 2011

    ….. If I ever saw a better example of social engineering in the private sector then the drubbing that Lloyds is now taking and has endured since the 25th of Feb then this is it, what are they hoping for that one day they can wake up and this once fine institution has completely vapourised from everyones memory both before HBOS and of course after the merger….this is the best peice of Lava Mas Limpio I have ever witnessed. Hey, you at the switch….. WAKE UP!


  2. George Williamson 27th June 2011 at 1:48 pm

    The current UK Banking crisis (it was different in the USA) was caused as a result of WHOLESALE FUNDING problems & not RETAIL LENDING. Comments on High LTV Lending being risky is to not understand this basic fundamental fact. Indeed high LTV mortgages can be much less risky than other mortgages.

    The WHOLESALE MARKETS tend to use “Loan to Value” (LTV) as an indication of risk, but if they had used the correct assessment of “Affordability” then we would not be in this mess. While doing my Banking Exams 20 years ago, we were taught to assess the Affordability and to never ever lend purely against security. If you need to take security to make the lend viable, then do not lend. Security can be taken to reduce default risk & reduce cost, but never to substitute a proper assessment of affordability. That is good old fashioned (Captain Mannering) banking.

    An example :-

    (1) Property Valuation = £1,000,000
    Mortgage = £100,000
    Income = £10,000
    Loan-to-Value(LTV)= 10%
    Income Multiplier = 10 times

    (2) Property Valuation = £100,000
    Mortgage = £100,000
    Income = £100,000
    Loan-to-Value(LTV)= 100%
    Income Multiplier = 1 times

    Which is the more affordable lend? It is Number (2) which is also the 100% Lending.

    Its AFFORDABILITY not LTV that matters.

    Until the credit crunch, we have never not had 100% mortgages available (in Scotland) in the last 20 years. Just about all my clients (including myself) started out this way. If you ban high LTV mortgages you will have to change Government policy to scrap Student Loans & reintroduce Student Grants or we will have no First Time Buyers for a decade. Why :-

    Students leave University with so much debt, it will take them circa 10 years to repay this debt & save a deposit. If you suggest they do not repay the student debt, but just save a 5% deposit and take a 95% mortgage, then please be aware that payments on 95% Mortgage + 5% Personal Loan are LESS affordable than a 100% mortgage, thus INCREASING the risk of mortgage default.


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