The withdrawal next March of the stamp duty land tax holiday for firsttime buyers on purchases up to pounds 250,000, combined with the better availability of
high loan-to-value mortgages, could see a modest increase in first-time buyer purchases over the next three months, with a possible fall off later.
First-time buyers, often seen as the lifeblood of the market, have been hit especially hard as availability of
high loan-to-value mortgages has decreased in line with lenders' risk appetite and funding availability.
They added that this caution was being reinforced by the higher capital requirements needed for
high loan-to-value mortgages.
There is a 'shortage' of finance for
high loan-to-value mortgages not because wholesale markets have 'dried up' but because lenders have now understood that they are risky.
That's particularly true for home purchases, where low interest rates, tax deductions, and low-down payment products have made
high loan-to-value mortgages more appealing to consumers.
Additionally, the majority of loans with credit scores less than 620 were
high loan-to-value mortgages. Given the strong industry focus on serving the affordable-housing market, which by some measures is over one-third of the total mortgage market, the 6.7 percent of loans with lower credit scores is a relatively low figure.
The announcement comes weeks after the Welsh Government scrapped its NewBuy scheme which would have supported the building of 3,000 homes and enabled buyers to have
high loan-to-value mortgages.
This is due to a decline in the availability of
high loan-to-value mortgages, rising inflation, persistently high house prices (the average house price in Tyne and Wear, for example, is around pounds 138,000), low interest rates and unemployment, which, by the end of 2011, had hit its highest level since 1994.
With this in mind they anticipate slightly less demanding credit scoring for home-buyers who apply for relatively
high loan-to-value mortgages.
The demand for
high loan-to-value mortgages is on the rise.
The scheme will work by underwriting
high loan-to-value mortgages that would not otherwise be available to buyers, marking a return to the 5% deposit deals that were widely available before the recession hit.
Mr James said that recently Your Move reported a 32% increase in the number of
high loan-to-value mortgages taken out by its customers, many of whom were first-time buyers who previously struggled to enter the property market.
