Mortgage News
LTV issues decelerating recovery
Lenders are facing increased calls to reduce their LTVs, with brokers warning that a reduction in rates will not be enough to sustain a recovery.
Last week, many lenders were prompted to slash rates after Libor fell to a record low of 0.55%, two year swap rates slipped to 1.75% and five-year swaps dropped to 3.10%.
Northern Rock, Woolwich, Abbey and Alliance & Leicester all released new deals, with Woolwich reducing its lifetime tracker by 0.45% to 2.79% for those with a 30% deposit.
Ray Boulger, senior technical manager at John Charcol, said that although competition was returning to the market, it would be premature to expect further low rate deals.
He added: “With the fall in swap rates, lenders are reacting to each other’s competitively priced deals and are breathing some much-needed life into the mortgage market. They seem to be not as concerned with the need to repair balance sheets. However, it is
important not to get carried away. It is a healthy sign but more lenders are needed to generate more competition.”
Richard Morea, technical manager at L&C, said higher LTVs were needed to sustain a growing recovery in the market as lenders were still primarily concerned with attracting low-risk business.
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He added: “The housing market has improved recently but it is primarily for lower LTV business. Any rate reduction is a good sign but I believe that, by and large, the good rates are available only for a few borrowers. While the reduced rates are grabbing the headlines, we need higher LTVs because it is hard for some people to access the market as deposits are still so high.”
Andy Frankish, managing director at Mortgage Talk, said brokers needed to ensure that they were in a strong position to capitalise from the reduced rates.
He added: “Good brokers must keep up with the changes by being there when these competitive products come out so they can give advice to customers on the best deals. We really need the smaller lenders and building societies to reduce their rates for more competition to return. I am hopeful this will happen after the Bank of England’s decision to hold interest rates at 0.5% and extend quantitative easing by £50bn”.