Many industry experts agree that the mortgage market needs more high loan to value mortgage deals for first time buyers. Indeed, Abbey for Intermediaries was commended recently for introducing an exclusive 90 per cent first time buyer deal. However, some brokers are frustrated that any products released at a high loan to value are seemingly aimed at first time buyers and are not available to remortgage borrowers.
Reports show that remortgage lending in the UK is at its lowest level since 1999 with many people unable to switch lender because of the lack of deals available. For others, it’s simply not beneficial to remortgage. Here, we look at the state of the large remortgage market and what needs to be done to kick-start this type of lending.
Remortgage lending at 14 year low
Many experts have argued that it is odd that lenders are focusing on the first time buyer market rather than offering similar high LTV mortgage deals to remortgage borrowers. By their nature, first time buyers have no track record of maintaining a large mortgage and so are riskier propositions than remortgage clients that have a proven track record of making payments.
However, mortgage expert David Hollingworth, said the reasons for adding restrictions to high LTV mortgage deals could be a volume issue. He said: “The house purchase market is fairly muted at present so if you remove restrictions from these products then the lender is probably opening itself up to a large amount of remortgage business at a high LTV which it probably doesn’t want.”
Mortgage Introducer published data from the recent LMS Remortgage Report which showed that gross remortgage lending in December 2012 was £2.7 billion; 13 per cent lower than in November and 24.7 per cent lower than the same time in 2011. December’s figure was not only the lowest recorded in 2012 but also the lowest monthly value since the end of 1999.
“One of the problems facing high net worth mortgage borrowers is that there simply isn’t much benefit to remortgaging,” said Islay Robinson, director of London mortgage broker Enness Private Clients. “Products at higher loan to values are rarely superior to reversionary rates that borrowers are already on. Consequently, there’s little point in switching unless you’re making a significant saving or a new deal is far more appropriate in terms of its structure or flexibility.”
“The LMS research found that the average LTV for remortgages in the UK is now just 56 per cent, proving that its only borrowers at low loan to values that are benefiting from the remortgage deals available,” he added.
Mortgage Introducer reports that ‘restrictions on the type of borrower are not the only obstacles brokers need to overcome if they want to remortgage their client – reasons for capital raising are also under scrutiny.’
“The maximum LTV for a remortgage is often reduced for borrowers who are looking to raise capital, particularly if it is to consolidate debts,” adds Mr Robinson, the high value mortgage specialist. “Increasingly, high net worth mortgage customers are turning to brokers to find non-traditional sources of lending – private banks for example – to help them remortgage.