Help to Buy 2 boost high loan to value mortgages


The amount of high loan-to-value mortgages lent out has almost doubled, supposedly as a result of the government’s Help to Buy scheme.

In the 18 months of the Help to Buy 2 scheme, leading up to June of this year, the number of loans lent out for 95 per cent of a property’s value (requiring a deposit of just five per cent) increased by 100 per cent, when compared to the 18 months before that.

3.43 per cent of loans overall in this time that were lent out were high loan-to-value, according to data from Genworth.

However, the market as a whole has grown massively, reportedly by £48.2 billion. Overall, out of every extra £100 that was lent in the market, £12.24 is thought to have been for 95 per cent loan-to-value mortgages.

Of course, the issue with high loan-to-value is that it will take much longer for the borrower to pay back the mortgage. Furthermore, they can be more of a risk to the bank.

First time buyers have accounted for 21 per cent of people buying into the market, which is promising. In the 18 months before the scheme became available, 19.3 per cent of buyers were doing so for the first time.

However, despite this overall increase, the second quarter of 2015 was the second in a row to see a drop in both first time buyers and the proportion of high loan-to-value mortgages, so the improvements in this sector, over 18 months of Help to Buy 2, may not be long-lasting.

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