Low LTV Mortgages 'Lead To Less First-Time Buyers'

Mortgages which require a large deposit put first-time buyers off purchasing houses, it has been asserted.

Borrowings which have a low loan-to-value (LTV) mean that these types of people are "forced" out of the market, according to an online house selling company.

The founder of the website said when there are "fantastically low" interest rates; lenders need to pass these on to customers. If financial institutions were to offer 90 to 95 per cent of the value of a property upfront, this would encourage more people to considering purchasing.

"There are people out there who want to buy, but they haven't got the wherewithal to do it," he argued.

The director gave the hypothetical example of someone wanting to buy a house of £154,716 and having to stump up a deposit for a 70 per cent LTV mortgage. This would equate to around £50,000.

"What first-time buyer has got [that] to put down?" he commented.

Loan-to-value (LTV) is a ratio that depicts the relationship of a loan amount with the value of a property. This ratio is obtained by dividing the amount of a loan by either the sale price of the property or the property’s appraised value. The lower of the two amounts is used.

Those who do not buy houses can instead rent or live with their parents. This might seem like a bad option but it can work to your advantage. As often parents are unwilling to charge rent or will only charge a nominal fee. This means you can start saving for a deposit so you will be much better placed to buy in the future.

If the thought of living with your parents or family brings tears to your eyes then set a time limit say one year and then aim to have moved out by then.
If you are looking to buy a house it is worth talking to an independent financial advisor about your mortgage options. Often banks and estate agents will have staff specially trained in mortgages and can help you.

If you would like to know more about mortgages why not AnswerBank Business and Finance.