According to the latest statistics, home loan brokers are increasingly searching for home loan products with high loan-to-value (LTV) ratios. The increase in high LTV loans signals that fewer homebuyers are saving up for large deposits.
For residential home loan searches, maximum LTV came in third for the most searched loan product. For second-charge loans, maximum LTV was the most popular search. However, self-build and equity release were the second-most searched loan products for commercial finance.
Lenders May Start Offering High LTV Home Loans Again
Whilst the number of enquiries for maximum LTV loans has increased, the number of home loans with high LTV ratios that are approved has not yet increased. It may take several months to determine if lenders are meeting the increased demand with by approving more high LTV home loans.
Brokers tend to see the latest property market trends before others. They see what their clients are looking for before lenders begin approving or denying applications. Currently, brokers are seeing more demand for secured home loans with minimal deposits.
Before 2008, many lenders offered high LTV loans. In fact, some lenders even offered 125% LTV loans, allowing borrowers to borrow more than the value of the property. However, after the 2008 financial crisis, many lenders had to evaluate their lending practices.
Following the crisis, 75% to 85% LTV ratios were considered acceptable. Borrowers with just 5% to 10% available for a deposit were less likely to get approved. In the past several years, 90% and 95% LTV ratios have become more common.
As lenders are facing increased competition, they have started to lower interest rates for their various loan products. If these trends continue, more lenders may start offering maximum LTV values again.
Lending to Self-Employed Borrowers and First-Time Buyers
Along with an increased demand for high LTV loans, brokers have noticed that a growing number of self-employed individuals are seeking home loans. Lending to self-employed borrowers was the top search for residential buy-to-let home loans, indicating that more people are choosing to work for themselves instead of choosing a more secure career.
There is also an increase in the number of first-time buyers, including first-time landlords, that are seeking home loans. For buy-to-let purchases, these groups were in the top positions after self-employed individuals. More people are interested in buying residential properties as an investment, showing that public confidence in the property market remains high.
New buyers are increasingly interested in rental properties. For commercial lending, the top search term was commercial investments. However, limited companies are also searching for loans for buy-to-let residential properties.
Keep in mind that many of these trends are based on the enquiries that brokers receive. However, the enquiries that brokers receive are often a sign of things to come. Over the coming months, it may become apparent whether the increased enquiries in specific areas result in an increased number of loans getting approved.
For now, most lenders offer high LTV home loans with minimal deposits between 5% and 10%. However, due to more competition and increased demand, some lenders may start offering 100% LTV loans.