Abstract
Overview
Introduction
High LTV mortgage loans have become commonplace in recent years, yet they
merit concern because of the risks they pose to both lenders and mortgagors.
Scope
- Provides data on the extent to which high LTV loans account for in the
mortgage market and for its major lenders.
- Discusses the benefits and risks of high LTV mortgages for both customers
and lenders.
- Provides insight into how lenders can reduce their exposure to potential
future problems.
Report Highlights
To accommodate customers challenged by a lack of affordability, as well as to
remain competitive with regards to customer acquisition, lenders have adapted
their offering by raising the LTV on their mortgages so that FTBs or young
movers can borrow with them. The proliferation of 100%+ LTV mortgages is just
one case in point.
While the vast majority of high LTV mortgages are offered by lenders that have
fully checked that the applicant(s) can afford it, they still expose borrowers
to a greater extent than traditional mortgages with a lower LTV. Indeed,
customers are exposed to the possibility of negative equity, a Higher Lending
Charge, and higher interest rates.
While high LTV mortgage borrowers are already exposed to risk, their exposure
becomes greater in an uncertain economy or in a recession. While no official
data is available, there is anecdotal evidence that mortgagors with high LTVs
are more likely to suffer difficulties with monthly repayments, go into
arrears and suffer repossessions more often.
Reasons to Purchase
- Evaluate the risk of high LTV mortgages for your business, as well as in
comparison to other lenders.
- Understand what steps your business can take to reduce risk in the future.
- Learn how lenders are reacting to a more difficult economic climate with
regards to high LTV mortgages.
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