Maximum Loan to Values – the latest

Maximum Loan to Values – the latest

Maximum Loan to Values – the latest

I have been delighted to use The Mortgage Works (TMW) Light Refurbishment product for Buy to Let. Whilst it has been on the market for a number of months, I have just had reason to use it for the first time. And what a great feeling to discover a product that shows a lender really thinking what a client needs and providing it – all in a safe, sensible fashion.

The basics are – you find a property that needs a light refurbishment (paint, caSo speculation and comment through the weekend press suggests that the Bank of England is considering a maximum loan to value (LTV) on mortgages against property values. (A mortgage of £85,000 on a property worth £100,000 is 85% LTV). The theory is this protects lenders and borrowers against dips in the market.

Some people might question whether this is about borrowers or lenders. They argue that the market is self regulating. Today, with no regulation, if you want a loan and you have a 25% deposit – it’s easy and you get a good rate. If you’ve got a 5% deposit you can chose from 25 mortgage products across the whole UK market (as opposed to 986 products 3 years ago).*

The problem though is it precludes those without a deposit getting onto the property market. I didn’t have a 15% deposit when I bought my first flat with my wife and neither do the vast majority of first time buyers – did you / do you? So an enormous amount of people will be completely excluded from the property market.

And what does its solve anyway? Firstly everyone who buys at 90 -100% loan to value knows they are taking a risk and that they might need a medium term view on their property value (even if they are crossing their fingers it goes up – not down).

So I think lenders should pay a lot more attention to income and affordability. Loan to value has it’s place – but only in the cost of the product.

For example would you lend to a trainee solicitor and her accountant boyfriend who only had a 5% deposit but great future earning potential?

But of course this old fashioned, prudent system is a lot more expensive, which would be reflected in higher mortgage fees. So maybe we are stuck with a computer system saying yes, or no….

* source: moneyfacts.co.uk

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