Will my mortgage interest rate rise if my LTV rises?

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noelÓm

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I recently drew down a fixed rate Ulster Bank mortgage with a loan-to-value (LTV) ratio slightly below 80%. I purposely tried to stay stay below the 80% threshold so as to benefit from a lower interest rate.

I would like to know what would happen to my rate if my LTV were to increase above 80%, whether due to a deterioration in the value of my house or a fall in market prices more generally. I am not so worried about this happening, but I am trying to keep the query as straightforward as possible with a plain example.

If people think their LTV has fallen, then posters on this forum have recommended that they inform their bank. What happens in the alternative scenario? Does the bank get on to you or automatically adjust the interest rate? I see that my provider is estimating a current LTV using my recent purchase price and simple house price index. It would be reasonably easy for them to approximate.
 
The bank will not get in contact with you unless you are finishing a fixed rate. They are obliged to send you details of rates which Is usually after a rate change.
If your ltv has improved then you contact the bank and discuss what they have on offer.. We were ltv 80% a good few years ago and then after paying down some of the mortgage and the value of the property increased we got to 60%.
Got a fixed rate for ltv of 60%. Sometimes you need a valuation but often they look at the property register near to your home. Also if you are close to the 60% you may get and exception.
In the case where prices fell through the floor the bank did not contact us.
 
You do not need to contact the bank if your ltv goes up but it's in your interest to contact them if it goes down and they might have a better rate. You won't hear from them in either scenario, the LTV is set when loan is drawn down and they don't go looking to alter it after that.
 
I think nothing would happen.

I had a colleague who benefitted from going below an 80% LTV in 2007 or so. By 2011 he was at 120% LTV and the lender never approached him.

Annoying borrowers who are fully performing is not a good idea.
 
Thanks. Very interesting to hear about experiences when prices fell. Also, very useful to know about potential wiggle room regarding a valuation and exact LTV thresholds.
 
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