Tuesday, 17 March 2009

High LTV mortgages are no more

The high loan to value mortgage is dying. According to the FSA, in the autumn of 2007 close to 9 percent of gross lending was going on mortgages with a loan to value ratio in excess of 90 percent. By the winter of 2008, that ratio had shrunk to just under 4 percent.

Loan to value ratios are not the only shrinking mortgage number. The FSA is considering a limit on loan to income ratios. In future, banks will be discouraged from giving loans in excess of three times income.

The real estate industry aren't happy: "Any move to further restrict mortgage lending would add insult to injury," said Trevor Kent, a former president of the National Association of Estate Agents. "It would be suicidal and cause property prices to come down yet further. Lenders are already reluctant to lend, and this would give them an excuse to put up another hurdle, stopping buyers getting access to finance."

Personally speaking, I am "insulted" by the "injury: caused to the UK economy by successive housing bubbles. Restrictions on excessive mortgage lending is long overdue.


Mark Wadsworth said...

Agreed. I'm surprised it's still as many as 4% of mortgages with >90% LTV, but hey.

Anonymous said...

Its 4 percent of a very small number, compared to 8 percent of a large one.

Gross mortgage advances are falling like a stone.

DBC Reed said...

The key sentence in the National Association of Estate Agents'howl is, (something like, I can't be bothered to check ) "Particularly as lenders are already unwilling to lend and these imposed ratios will just give them another excuse not to."
Put it another way: I don't think the banks will be that keen to lend on mortgages even at these low ratios.

Anonymous said...

It is about time that prices dropped to realistic levels - I see huge price drops over the next few years - you won't be able to give 'em away soon LOL!.
Under Nu Labour, the UK has become a place that is bankrupt morally and financially - there are huge social divides and people have got very selfish.
When first time buyers are frozen out of the market, that signals the end of any property boom... and lets face it, this one was truly crazy... thanks again to Gordon Brown... idiot !

CityUnslicker said...

But the market has already provided the solution, there is no splurge of lending to un favourable types now.

Hence no new mortgages, hence no need for new rules.

The cause of this disaster is not reckless banks, but reckless government and central banks, they created the low interest rate world in the face of high inflation which ensured people wanted to buy houses with cheap and available debt.

A regulation too far this.

Anonymous said...

Bring - it - on! Bring - them - down!

I see everyday the damage done to the country by the housing bubble. I see the crappy streets with the million pound houses, which for that money, would get you a nice house in the wealthiest parts of countries like Canada. You can't tell me a nation of floppy haired fools, shaven headed hooligan/BNP freaks, and islamic radical nutcases, is worth more than every other western country.

Electro-Kevin said...

Hear hear, Alice.

3x main salary + 10% deposit

Then mums can bring up their own kids and no-one has to work overtime just to live in a hen run.

Anonymous said...

Why should a willing lender be constrained from making a loan to a willing borrower, however foolish, PROVIDED BOTH BORROWER AND LENDER HAVE TO SUFFER THE CONSEQUENCES. It is the unwillingness to let anyone suffer that is the problem, not the freedom to lend.

Anonymous said...

I agree with the above comment from anonymous and also from cityunslicker. Provided the banks are capable of absorbing their own losses, what they consider to be a good risk is their own business.

This legislation is tantamount to providing a one size fits all defense for the public purse, when the goal should really be independant banks.

I have no idea why the operation of Lloyds the insurance, which had unlimited liability for members, is not seen as applicable to the banking industry, given the need for financial insurance of mortgage securities.

The government is not fit to run the financial industry and any move in that direction is a mistake.

Anonymous said...

Just goes to show how much of this new regime in the FSA is just for show. High LTV mortgages to be banned after people are pretty much no longer offering them. Attacks on bonuses when banks aren't paying them - beyond what they are legally bound to. etc etc. Anything for a headline right?

Saw G20 didn't meet GB's expectations, i am sure that the news coming out about BARCL was just one of those crazy timing coincidences...

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