Jon Cooper, head of mortgage distribution at Aldermore, discusses our recent 90% LTV trial and how we plan to re-enter this important sector.
We know placing high LTV customers is challenging for brokers in 2020. Products are hugely limited, as lenders balance risk against volumes and service levels during the pandemic. The number of 90% LTV products has been decimated since March with only a handful remaining, many of which are limited to specific postcodes. Aldermore is keen to help brokers support high LTV clients by returning to lending in this key market, while maintaining our service level and managing our risk profile. So, last month, we trialled two 90% LTV products, with great success.
What we did
We launched two temporary 90% LTV fixed mortgages through brokers in early November – a two- and five-year fixed-rate, both available to a maximum 5.5 times loan-to-income ratio. We knew demand was going to be high from first-time buyers and borrowers, particularly those who want to complete on a purchase before the end of the temporary Stamp Duty holiday in March 2021. As one of the first specialist lenders to relaunch 90% LTV mortgages, we wanted to help brokers secure funding for their clients. And the trial enabled us to better understand the types of customer requesting this product to help us plan our high LTV strategy.
Our temporary 90% LTV products proved hugely popular with brokers, and the trial has taught us a lot. We’ve since analysed our experience of returning to 90% lending to guide our future
approach to this sector.
What we learned
Unsurprisingly, we had a really positive response from brokers and the products were in demand from a diverse range of clients:
- We saw particularly strong volumes of business from the northern regions of England, Wales and Scotland, and relatively less from London and the South East.
- We also noted a high level of applications on new-build properties.
- The applications we received were of an extremely high quality and conversions to offer were very high.
- All the cases we received were for purchases, although the deals were also available to those remortgaging.
- Three-quarters of applicants opted for our two-year fix, with a quarter favouring the medium-term security of the five-year rate.
- Almost eight in 10 applications (77%) came from first-time buyers, with 23% from home movers.
We know brokers need more options at higher LTV levels and we’re committed to re-entering the 90% market soon, on a longer-term basis. Our trial last month gave us invaluable information to plan our approach to high LTV lending. For now, we continue to offer our 85% LTV product up to 5.5 times income and we’re reviewing our lending criteria as the pandemic develops, alongside business volumes and our service levels.
Aldermore’s flexible approach to underwriting means that we take individual circumstances into account, and we look for ways to say yes where we can. We know your clients need more 90% LTV options and we’re committed to being back in the market soon.
Credit: Jon Cooper, Aldermore