Brendan Burgess
Founder
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Here is a summary of the lending in 2013
LTV ratio|% of loans
Over 90%|11%
85% -90%|21%
80% -85%|8%
< 80%|60%40% of loans were in excess of the 80% limit. So the 15% exemption will not cater for many of them.
As house prices have risen in the meantime, it's likely that the demand for mortgages over 80% will far exceed the supply available. What happens when demand exceeds supply? The price rises. Or we might go back to the mortgage rationing we had in the 70s. Where you apply for a high LTV loan, and you are told to wait a year or two.
People will be so glad to get a mortgage that they won't care if they are paying 6% or 7% for it.
As the high LTV mortgages will be extremely profitable, the banks will need to sell a lot of new low LTV loans. So the rates for this business will probably fall.
Over 90%|11%
85% -90%|21%
80% -85%|8%
< 80%|60%
As house prices have risen in the meantime, it's likely that the demand for mortgages over 80% will far exceed the supply available. What happens when demand exceeds supply? The price rises. Or we might go back to the mortgage rationing we had in the 70s. Where you apply for a high LTV loan, and you are told to wait a year or two.
People will be so glad to get a mortgage that they won't care if they are paying 6% or 7% for it.
As the high LTV mortgages will be extremely profitable, the banks will need to sell a lot of new low LTV loans. So the rates for this business will probably fall.