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No more love of the 125% LTV market

As of today, the market for loans up to 125 per cent loan to value is no more. BM Solutions has become the last lender this week to confirm it has pulled out of the market as of yesterday – giving brokers no notice at all.

In a product update email this morning, BM Solutions said it withdrew its self-cert 90 per cent LTV and Mortgage Plus products at midnight last night.

It says it apologises for not giving its normal notice.

The alert said: “We constantly review our product offerings and make changes as and when necessary. We have withdrawn our self-cert 90 per cent LTV and Mortgage Plus products and will not be replacing them at this time.”

Northern Rock announced it was pulling its Together product yesterday, two days after Abbey, Alliance & Leicester, Coventry Building Society and Godiva Mortgages confirmed they would no longer be offering these loans.

So another specialist part of the UK mortgage market has disappeared for the time being, leaving first-time buyers in an even more difficult position. With this section of the market deemed as too high risk for the time being, it may not be long before players also start to withdraw from the 100 per cent LTV arena.

While there has been a lot of bad press about lenders offering combined mortgage and unsecured products with a potential LTV of 125 per cent – particularly from politicians, who seem set on attacking Northern Rock’s reckless lending especially with its pioneering Together product – it is clear it is an important part of the UK mortgage product stable.

What most people do not seem to realise is that although there is the potential for a borrower to borrow up to 125 per cent LTV with these products, the product is actually only made up of a 95 per cent mortgage with the rest made up of an unsecured loan.

It has also been pointed out by some mortgage commentators that the average LTV taken out by people on these products tends to only be around 105 per cent, far off from the 125 per cent that politicians are in outrage against.

Plus, is there really any difference with these products than people who have taken out a high LTV mortgage – but under 100 per cent – but also have loads of personal loans and credit card debts?

Lenders don’t just offer these products to anyone who comes in from the road asking for a mortgage. The tight credit scoring means that not many people will actually be able to get this product unless they are deemed to be able to afford it.

It will be a shame if lenders do not re-enter this market as there is clearly a need for this type of product. In the first half of 2007, Northern Rock did a 26.1 per cent share of new lending on its Together product and it has consistently throughout the years proved to be popular with brokers and borrowers alike.

Elsewhere, job cuts continue to be announced across the mortgage market. Platform announced it would be making 65 out of its 305 workforce redundant, while investment bank Lehman Brothers confirmed another 200 job cuts in its UK capital markets division affecting its last two UK lenders SPML and Preferred.

Lehman Brothers remains tight-lipped about what exactly are its plans for its UK mortgage origination arms but claims it will continue to play in this market. Whether it needs two UK lenders is another question.

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