The Building Societies Association's Paul Broadhead said: "The BSA would urge caution with the one-size-fits-all approach of limiting LTVs. Whilst higher LTVs are not suitable for every borrower, they represent a good opportunity for some to get onto the housing ladder. As long as the borrower is able to afford the mortgage, and they recognise the implications of taking out such a loan, they have a role to play. Removing high LTVs from the market could exclude a proportion of borrowers who are perfectly able to service their loan."
Alan Cleary, managing director of Precise Mortgages, believes “reasonable LTV caps around the edges could be an acceptable way of getting a topsy market under control”.
He said: “As long as LTV caps are implemented sensibly and aren’t used in a way that excludes people from getting a mortgage they could help deliver a more sustainable market in the future. It’s in nobody’s interest to have an overheated market long term.”
Andrew Montlake, communications director of London-based broker Coreco, agreed that if controlled properly caps wouldn’t necessarily harm the market.
He said: “By rights the FSA shouldn’t really intervene in free markets and decide what’s good for customer. Having said that the fall out would depend on what level LTVs are capped at. If they’re saying we shouldn’t have any more mortgages over 95% that’s probably sensible.
“But if they capped LTVs at 85% that would fundamentally change the UK property and mortgage markets and lock out a whole raft of first time buyers from ever getting on the property ladder.”
Like the BSA, Kevin Friend, former strategic partnerships director of mortgages.co.uk, was wary of regulators using this tool in the future.
He said: “This could stifle the market. High LTV lending does not mean more risk it means less security. The risk is in the borrower’s ability to repay. Any significant cap on LTVs would be like going back in time to a very restricted market and would kill any future growth.”
Fahim Antoniades, director of Mortgage Centre IFA, was against the idea.
He said: “LTV caps are very prescriptive. The regulator is right to be concerned about problems the market faces but it has to be careful about how it protects lenders and markets. This type of action encroaches on free market principles – people have to be allowed to run their businesses themselves.”
