Is there a disincentive for a lender to exceed the 80% only slightly?

[Brendan Burgess]

From: [broken link removed] (updated 02/02/15)

 

[Brendan Burgess]

For simplicity, let's say a lender only does lending to second and subsequent buyers so the 80% limit applies.



Say, they have only €300k left to lend within their allocation for this quarter.

Are they better off lending it to someone on 90% LTV rather than someone on 81% LTV?

The person on 81% can probably get within the 80% limit, so the lender can now make two loans.

 

[Brendan Burgess]

Would it be better to limit the excess to 5% of total loans?

So a loan of €300k @81% would use up only €3k of the limit.

A loan of €300k at 90% would use up €30k of it.

Brendan

 

[trasneoir]

Say, they have only €300k left to lend within their allocation for this quarter.
Are they better off lending it to someone on 90% LTV rather than someone on 81% LTV?
The person on 81% can probably get within the 80% limit, so thelender can now make two loans.

The contrary may be true I think.
Yes, the 81 percenters might be back next month with a bigger deposit, unless another bank uses their "exception money" to accept that customer first.
Think of the pool of mortgage-seekers in this situation as apples on a tree. Each bank will want to pick the low-hanging fruit first, before somebody else does.

 

[Brendan Burgess]

Hi traisneoir

I spoke to a few lenders and they say that they don't favour the bigger loan. If they are going to make an exception, they make it.

But they like my idea of having a quota for the amount above the limit. So they could give lots of loans at 81%.

Brendan