The 90% LTV Mortgage is Back: What This Means for Buyers

Recent months have seen most major lenders become increasingly reluctant to offer high LTV mortgages, primarily due to the economic uncertainty brought about by the COVID-19 crisis. As life slowly begins to show signs of normality once again, some of the nation’s leading lenders are once again introducing higher LTV home loans.

Nationwide in particular appears to have first-time buyers in its sights, having for the first time in months begun offering 90% LTV mortgages.

Affordable and accessible borrowing

Exactly as the name suggests, a 90% LTV (or Loan to Value Mortgage) is a home loan offered to the value of 90% of the property’s total purchase price. The remaining 10% is being picked up by the buyer by way of a deposit.

In a typical working example, this would mean that a 90% mortgage on a £200,000 property would be offered to the value of £180,000, with the remaining £20,000 being the initial deposit requirement from the buyer.

The vast majority of first-time buyers have traditionally favoured 90% or even 95% LTV mortgages, due to the difficulties most encounter when attempting to put together a deposit. Over the past few months, most lenders have been unwilling to offer anything more than 80% or even 75% LTV on home loans for first-time buyers, meaning deposits of 20% or 25% are payable.

On the same £200,000 property, this would mean coming up with a deposit of £40,000 or even £50,000—the kind of cash most first-time buyers simply cannot save in a reasonable time.

There are no immediate signs that the return of the 95% LTV mortgage is imminent, though the reintroduction of the 90% mortgage has come as welcome news to first-time buyers across the UK. Work out what a mortgage would cost you using our UK mortgage calculator.

Leading the charge

Nationwide is so far leading the charge for affordable and accessible borrowing, having announced that its 90% LTV mortgage product is once again available as of July 20. Experts believe that the flexibility of major banks and lenders will play an important role in restarting the housing market and the wider economy in the wake of the COVID-19 crisis.

Speaking on behalf of Nationwide, Mortgage Director Henry Jordan stated that the decision had been made on the back of Rishi Sunak’s recent announcement regarding the temporary cut to stamp duty tax. Initial signs of housing market activity returning to pre-Covid levels are also giving lenders the confidence to offer more competitive deals for first-time buyers and existing homeowners alike.

In addition, Nationwide stated that there will be no initial limitations placed on the number of 90% LTV loans available or the loan amounts on offer for those who qualify.

Stringent eligibility checks

Though the reintroduction of the 90% mortgage is welcome news for buyers at all levels, applicants can still expect comparatively stringent eligibility checks when applying with major lenders. Particularly where proof of income and credit history is concerned, most mainstream lenders remain unwilling to take chances during the current period of economic uncertainty.

Whether you are planning your first home purchase or considering relocation, working with an independent broker could save you time, effort, and money. Particularly if you have concerns regarding your credit history or your ability to provide comprehensive proof of income, it is advisable to apply via a specialist broker rather than approaching any mainstream lender directly.