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Back to the future as 95 per cent LTVs make a welcome return – Phillips

by: John Phillips, national operations director Just Mortgages and Spicerhaart
  • 14/05/2021
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Back to the future as 95 per cent LTVs make a welcome return – Phillips
After a turbulent 12 months, 95 per cent loan to value (LTV) products are back. Turns out we didn’t need a time travelling DeLorean to get here — just a government guarantee scheme.


The government’s 95 per cent LTV mortgage guarantee is being offered only by a handful of lenders, but this is a welcome addition to the products already out there.

According to MoneyFacts, more than 100 products are back on the market already, with more coming daily.  

However, we are still a long way off normality. At the start of 2020, MoneyFacts data stated there were 391 mortgages requiring a five per cent deposit.  

The full return of these products may take more time, but those back on the market are having an impact.  

The first few months of 2021 have been incredibly busy, and fears that the stamp duty holiday ending would result in a cliff edge seem to have been unfounded.  


How long can it go on?

The question on everyone’s lips is: how long can this intense pace last?  

Purchase activity has been key to demand so far this year, and this trend shows little sign of slowing down. More homes changed hands during the final three months of last year than during any quarter over the past 13 years, according to figures from HMRC.  

Ahead of the initial stamp duty holiday deadline, sales agreed in March stood at almost 162,000, according to TwentyCi. This was a record since the property data company began collating figures in 2016, with the number of transactions more than a third higher than February last year. 

While we cannot keep going at this historic pace, the re-introduction of 95 per cent LTV mortgages will bring more buyers to the table. And with people looking to move, the market will continue to turn, albeit at a slightly slower pace than the first quarter of 2021.  

Beyond the products and criteria, the motivating factors behind people looking to move are intriguing. 

The pandemic has changed the way a lot of us work, but will these changes stick once we are all allowed back into the office? The answer is probably not definitive either way.  

There will be some who will work from home full-time, regardless of lockdowns. Others will go straight back into the office. And there will inevitably be those who opt for a hybrid of the two.  

Whichever way people work, the genie is now out of the bottle, and that means there will be those who no longer need to live near the office, or who now need an extra bedroom to work from. This will continue driving the desire for moves throughout the year.  


Push and pull of city life

What shouldn’t be overlooked is the impact of refinancing.  

There are due to be more than 700,000 residential fixed-rate mortgages reaching maturity in 2021. While it can be easy to focus on new business, particularly with the number of buyers looking for mortgages, brokers should ensure they are in contact with existing clients to make sure they have the advice they need.  

The return of 95 per cent LTV lending is a welcome reminder of the pre-pandemic world, but what has changed is the needs and desires of clients.  

It remains to be seen if we fall back to the old ways in a few years as we move away from the pandemic. Perhaps this will see another rush on the housing market as everyone looks to move back to cities to be close to the office once again.  

What’s clear is that, even with a DeLorean, this housing rush does not look set to end anytime soon. 

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