Mortgage lenders urged to increase their LTV ratios to help solve the housing crisis
An estimated 90,000 new build homes across the UK remain empty as prospective buyers struggle to build deposits to get on the property ladder, specialist finance lender Atelier has said.
Data analysis has shown that homebuyers now need around £70,493 for their deposit on standard loan-to-value (LTV) ratios of 75% with the average house price set at £281,974, as reported in the latest Halifax House Price Index.
This deposit amount, Atelier pointed out, is beyond the reach of many, especially first-time buyers whose budgets have been eroded by inflation, meaning tens of thousands of properties marketed at those looking to buy their first home are left empty.
With the proportion of people who thought mortgage affordability was a barrier to homeownership now at its highest level in 15 years, Atelier is calling on mortgage lenders to increase their LTV ratios to attract first-time buyers away from the rented sector, which is also under enormous pressure.
Atelier noted that while government policies, such as the Mortgage Guarantee Scheme, are attempting to plug this deposit shortfall, take-up among lenders remains minimal.
According to the specialist lender, many mortgage loan providers had previously retreated from 95% LTV mortgages, citing the potential for borrowers to fall into negative equity. But these fears are overstated, Atelier pointed out, given more modest falls in UK house prices than originally predicted and recent UK Finance data showing that only 2.5% of mortgages were in arrears and only 0.04% had been repossessed.
“The residential property market has always been an essential driver of the UK economy,” commented Chris Gardner (pictured), joint chief executive at Atelier. “So why are there still so many barriers for first-time buyers trying to get on the ladder?
“For all of the talk of a restrictive planning system stifling the property market, the real culprit is in fact restrictive mortgage LTVs. As long as they remain low, the pool of property purchasers will be limited.”
The solution is simple, according to Gardner, and it does not involve another waiting for the government to act.
“Higher LTVs from mortgage lenders would quickly place empty new-build properties into the hands of those they were originally built for and unlock the current market stasis,” he said. “While some mortgage lenders, such as Newcastle Building Society, have re-entered the 95% LTV market, recent figures from the FCA show that in the second quarter of 2023, only 4.45% of new mortgages had an LTV ratio of above 90%.
“While government support is always the focus of the first-time buyer debate, it is often not enough to meet the needs of first-time buyers who can’t get a foot in the door. For the benefit of everyone, the market needs to lend a helping hand and mortgage lenders are sitting on the solution.”
Gardner added: “We all know that mortgage lending is one of the least risky types of lending. In tough economic conditions, every possible spend is cut before mortgage payments are impacted. Lenders should take action now.”
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