The solution has been developed by Market Mortgage, in partnership with house builders, lenders and a well-known investment bank, with the aim to provide 95 per cent loan to value (LTV) lending in parts of the market not currently served.
The development work has been taking place during the past year with the end of the Help to Buy scheme in mind — but the new high LTV residential mortgage products will be offered on secondhand homes as well as new builds, and to home movers and first-time buyers.
Two mainstream lenders are poised to launch on the platform in the summer-time, with full product details soon to be announced.
The Market Mortgage technology has been built by former chartered accountant Eliot Darcy. The platform provides a way to bring together lenders with house builders and the investment bank, enabling 95 per cent mortgages to be offered to customers.
Under the new scheme, the lender provides a loan of 85 per cent of the property value, while the investment bank tops up the loan with an additional ten per cent layer of lending. House builders make a contribution on every transaction, which goes to reduce the interest rate charged on the top 10 per cent layer of the loan.
The investment bank’s loan is subordinate to the retail lender’s, meaning that in the event of a repossession, the retail bank is first in line for payment.
Following the initial launch, Market Mortgage aims to bring on board more lenders and house builders of all sizes from across the country.
Douglas Cochrane, former head of new build lending at Lloyds, and now a consultant at Mortgage Advice Bureau, said: “It’s great to see the Market Mortgage platform providing a long-term solution to the new build market for all buyers, as the Help to Buy equity loan scheme – which was for first-time buyers only – enters its final phase towards a planned close in 2023
“A big benefit for lenders is that this creates confidence, not only in new build lending, but other types of high LTV lending, through risk-sharing in a safe way.
“It’s easy for brokers too: this is a normal 95 per cent loan to the borrower, in every way, except it’s in new areas where brokers don’t normally have a choice of product to offer.”
David O’leary, policy director at the Home Builders Federation, which is helping to roll out the scheme to builders, said: “We’ve seen strong appetite from national lenders working with Market Mortgage to get the lending in the market this summer. With considerable support from developers, we’re working with the platform to ensure that this solution is accessible and affordable for many home builders across the UK, large and small.
“The product will offer a great opportunity for homebuyers to access higher LTV mortgages with support from their builder.
Eliot Darcy, chief executive at Market Mortgage (pictured), said: “This cash-based solution is easy for the lender and broker, because it’s built around the borrower. It’s a normal 95 per cent mortgage, but in areas where there isn’t otherwise a product on offer.
“The lender and broker can just get on with standard 95 per cent lending in the safe knowledge that this solution is in support behind the scenes.
“For the borrower, there is absolutely no change to their 95 per cent mortgage. The top-up happens behind the scenes, so it’s a normal loan as far as the borrower is concerned.
“Our investors are effectively providing a deposit, so the bank can lend at a lower LTV risk which it’s comfortable with. It’s for borrowers who can comfortably afford mortgage payments, but just don’t have a big deposit,” Darcy added.
Market Mortgage is the latest private sector solution in the high LTV arena and comes on the heels of Deposit Unlock, the reinsurance-backed scheme for new builds, which was announced last month.