High LTV rates on the rise with big lender moves

Interest rates on high value mortgages (LTV) are rising again after several high street lenders moved in recent weeks.

After last year was dominated by a price war between lenders furiously cutting rates, it looks like rates are starting to rise as the economy emerges from lockdown.

Last week, TSB, Barclays, Halifax, Santander and Accord raised their rates, while NatWest re-entered the 85% LTV market and Nationwide reintroduced its 90% LTV offering.

As a result, according to data provided to Mortgage Solutions by Moneyfacts, July saw average rates in the 80%, 85%, 90% and 95% LTV brackets climb.

It is perhaps unsurprising that the top two tranches saw the biggest increases given the turmoil in these areas, as many lenders temporarily moved in and out of the markets to manage demand and levels. on duty.

However, the 80 and 85% LTV levels are now seeing rate increases as demand also increases in these areas, particularly after the stamp duty reductions announced in the past two weeks. (See graph below)

Tale of two halves

On June 1, the two-year average rate of 80% LTV was 2.14%, with the equivalent of 85% LTV being 2.09%.

Both have now risen to 2.2% and 2.23% respectively – with the bulk of those increases occurring in the past two weeks.

The same situation happened in the five-year fixed market – the rates of 2.37% and 2.32% for LTV contracts at 80 and 85% respectively have now fallen to 2.44 and 2.49% .

Again, most of these events have been observed since July 15.

In contrast, the 90% and 95% two-year and five-year LTV tranches experienced the largest movements between mid-June and mid-July.

It should be noted that, particularly in the 95% sector, the majority of the products remaining available are specialized options such as guarantor or family assistance offers, and other limited criteria.

The prices go up

Eleanor Williams, spokeswoman for Moneyfacts, noted that after average mortgage rates plunged to historic lows in early July, those averages are now starting to rise.

“The specter of negative equity in the event of falling house prices was also a concern and was likely factored into lenders’ risk assessments, although whether this fear will be borne out remains to be seen,” he said. she declared.

“The remaining transactions for those with lower equity levels in particular have seen unprecedented levels of borrower demand, which has implications for the operational capabilities of the provider and, of course, supply and demand. .”

She added: “The mortgage landscape remains exceptionally fluid and although rates are beginning to rise, competitive offers are still available.

“Therefore, those who are eligible and considering their mortgage options may wish to act quickly, and also seek advice and support from a qualified, independent adviser.”

Owain Thomas is an editor and contributor to Mortgage Solutions and editor to Specialist Lending Solutions. He also has experience in the areas of pensions, pensions, benefits and human resources. Owain has won two Headline Money Awards and Protection Review’s Journalist of the Year award.

Comments are closed.