Demand for higher LTV mortgages is high but supply is very low

The mortgage landscape has been transformed by the global financial downturn from a once thriving market full of a variety of products into one that consumers now have to struggle to find one that ticks all the boxes.

A huge disparity now exists between supply and demand of mortgages at a high loan-to-value (LTV), according to new figures from consumer website moneysupermarket.com.

Some 17 per cent of consumers are looking for mortgages at 90 per cent LTV - which means that they only have a ten per cent deposit - but there are only 163 products that they can qualify for, which is just six per cent of the whole market.

Consumers falling in this category also face another impediment, according to the website, which points out that 'it is 30 per cent more expensive to borrow at 90 per cent + LTV than under 75 per cent'.

According to moneysupermarket.com head of mortgages Louise Cuming, the decline in house prices has not made it any easier for buyers to purchase property because now they need even bigger deposits to fulfil their dreams.

"It is a shame lenders continue to be so equity focused - if an applicant can prove they are able to afford repayments, they should be trusted with the mortgage," she stated.

"Not only will those with smaller deposits find it harder to get a mortgage, but when they do they are likely to be charged a higher rate," she stated, adding that on average 90 per cent + LTV products attract a 6.26 per cent rate.

"The average rate for mortgages between 75 and 89 per cent LTV is 5.1 per cent, and the average rate for mortgages between 60 and 74 per cent LTV is just 4.8 per cent - making it 30 per cent more expensive to borrow at 90 per cent + LTV," she explained.

Ms Cuming went on to advice those keen on purchasing property to concentrate on saving as much as possible and build a bigger deposit before making a move as this is likely to translate to "significantly lower monthly repayments".

According to Robert Sinclair, the director of the Association of Mortgage Intermediaries, the problems currently being experienced in the mortgage market need a coordinated effort from all stakeholders.

Industry players need to come together to identify why the sector is in difficulty at the moment, said Mr Sinclair, who has recommended stricter rules being put in place for any firms interested in entering the mortgage market in future.

"We do not believe that the focus of regulation and oversight should be on products and loan-to-value levels," he said.

"Instead, we need to look more closely at the operation of the wholesale market and the business models of lenders," he said.

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