For their lower rates for those with a 5% deposit, consumers need to be better schooled on the advantages of guarantor mortgages, said Richard Merrett, technical director at London-based mortgage broker Alexander Hall.
“The concept of the guarantor mortgage has largely been eroded and advisers have had to look for other means of servicing clients who struggle to get on the ladder,” he added.
Merrett said initiatives like Help to Buy, although helpful, are not for everyone but added a guarantor-style or family asset mortgage, like the Family Building Society product, does allow borrowers with a 5% deposit to obtain a lower rate.
Better education is needed on the product sector, he added, so guarantor-style products are considered ahead of options like joint mortgages.
Keith Barber, director of business development at the Family Building Society said despite the resurgence of the 95% LTV market the Family mortgage has performed very well.
“From our point of view, we’ve seen interest for both the security and the cash version of the product because what they’ve got there is a 90-95% mortgage but at rates that are more relevant to larger deposits.”
John Cupis, managing director, mortgages at Sesame Bankhall Group agreed saying the government schemes have been extremely useful to the housing market generally but were never intended to last forever.
“The expectation was always going to be on lenders and building societies to fill that gap with innovative lending,” he said.
Robert Sinclair, CEO of the AFB and AMI said:” I think there’s a lot of latitude for lenders to get back to a better position through individual underwriting to make good judgments on committed and essential expenditure. This is not what we’re seeing from other lenders who throw all the [information] into a pot and say you can’t afford it.
“Most of us know this isn’t an effective way to run a credit risk business,” he added.