The ratings agency said that lenders often mask their mortgage books' risks by using loopholes in the way they work out average LTV ratios
This increase reflects the gradual worsening of metrics such as Fitch stressed LTV ratios
, percentage of IO loans and subordinate debt--"the result of increased competition amongst lenders and greater confidence in the economy," MacNeill said.
Each borrower is only entitled to seek a loan for one property falling within these two categories and therefore it would appear that these LTV ratios
are intended for owner occupiers.
In some cases, these recent LTV ratios
are well below the LTV ratios
of maturing loans, which raises the question of whether maturing loans can be refinanced in today's more restrictive lending environment without requiring additional equity.
Normally LTV ratios
are decided by lenders taking account of current and prospective interest rates, the risk characteristics of the borrower, the riskiness of the asset being offered as collateral, their own balance sheet and liquidity in addition to the prospects for the economy over the period in which they expect to have the exposure," Dr Nasser Saidi, former chief economist at the Dubai International Financial Centre, told this scribe.
Originators tend to limit LTV ratios
at high interest rates.
A spokesman for the Council of Mortgage Lenders (CML) said that while the 18-month funding for lending scheme is still in its early stages, it is "encouraging" to see product ranges increase across LTV ratios
The "stable" outlook reflects the rater's view that the securitised assets' performance will continue to fall within our expectations, thereby maintaining the LTV ratios
and DSCRs at levels that commensurate with their ratings.
With the corresponding increase to 68 per cent, the UK now has one of the world's highest LTV ratios
- higher than both the global and European averages, although leverage levels are still lower than in the US.
In summary government regulation, rent-to-buy, redundancy insurance, higher LTV ratios
, relaxed lending criteria, extensions to cancelled work visas and above all total transparency will breathe confidence back into the UAE real estate sector," Nimer added.
Generally, mortgages with higher LTV ratios
(smaller down payments) and lower credit scores are riskier than mortgages with lower LTV ratios
and higher credit scores.
2, 3) Because borrowers with low LTV ratios
have substantial equity stakes in their homes, they are more likely to take every step possible to avoid default.