Many mortgage lenders are withdrawing their higher loan to value (LTV) mortgage products. Those with 95% LTV are virtually non-existent nowadays and over half of 90% LTV mortgage products have been pulled.
Even those lenders that do offer 90% LTV are quickly withdrawn as demand for lower deposit mortgages exceeds supply and the lending facilities earmarked for that type of mortgage are very quickly used up.
Why is this happening? Many predict a slowdown in the economy with a three way combination
This may mean that property prices fall. If property prices fall 10%, the this will leave lenders in a precarious position that there is no equity ‘cushion’ within the property if they ever need to repossess.
Toxic debt like this we the cause of the bank collapse and credit crunch crisis of 2008/09. Many lenders fear that additional and more stringent capital adequacy requirements as set out by regulators may be breached if too much ‘lower quality’ lender takes place leaving banks exposed to property prices falls.
The spiral staircase beckons. If there are less and less people at the ‘1st time buyer’ end of the markets, this means that people in starter home properties, ready to move up the property ladder, will not be able to sell leaving to stagnation, not just at the bottom end of the market but also at the middle and top end.
A broken property ladder that will need fixing eventually.