LTV stands for loan-to-value ratio – the percentage of the cost of a property that a lender will lend. For example, if a house costs £300k, with a mortgage at 90% LTV you could borrow up to £270k (90% of £300k). That would leave you needing to find the other 10% (£30k) up front. The higher the LTV ratio the better, because it allows buyers to purchase properties with smaller, more achievable deposits.
Over the last few years lenders have been reluctant to offer mortgages with a high LTV. This has meant that people looking to buy property have been expected to have huge sums up front as a deposit – pricing many people out of purchasing, first-time buyers in particular.
Ratio creeping up
So it was merciful news earlier in the summer when a few 95% mortgages popped up on selected new build schemes. Although these were restricted to certain new developments, it had a knock-on effect of encouraging lenders to improve the rates and terms of their 90% offerings.
Then in August, Cambridge Building Society became the first major lender to offer semi-exclusive 95% deals. Their ‘Easy Start Mortgage’ for first-time buyers has an LTV of 95% and a reduced interest rate in the first year. They also now offer two other fixed-rate mortgages at the same generous LTV for all purchasers.
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This is a major step forward in helping first-time buyers to enter the property market. We hope that it will encourage the competition to offer mortgages at similar loan-to-value ratios.
To find out if you qualify for a 95% mortgage, contact us today. Advice is free, and the latest deals from Cambridge could be just what you have been waiting for.