We talk mortgages
Jon Cooper, head of mortgage distribution at Aldermore, discusses our recent 90% LTV trial. We plan to re-enter this crucial sector. Brokers faced significant challenges in 2020 when securing high LTV (Loan-to-Value) customers.
Limited product offerings defined the market during the pandemic. Lenders tried to balance risk management, handling volumes, and maintaining service levels. Since March, the availability of 90% LTV products has drastically declined. Only a few options remain, often restricted to specific areas.
Recognising brokers’ hurdles, Aldermore has taken steps to assist them with high LTV clients. Our commitment involves re-entering the lending landscape for this market segment while prioritising service excellence and managing our risk exposure.
Recently, we conducted trials for two 90% LTV products. The outcomes were highly successful.
We aim to address existing challenges and broaden the scope of high LTV products for brokers. By re-entering this market, Aldermore seeks to empower brokers with more diverse options. This will foster a mutually beneficial environment for both brokers and high LTV clients.
We remain dedicated to navigating the complexities of the lending landscape. Our efforts aim to contribute positively to the industry as a whole.
We talk mortgages | What we did
In early November, we launched two temporary fixed-rate mortgages with a 90% loan-to-value (LTV) ratio. These were available exclusively through brokers. The products included a two-year and a five-year fixed-rate option. These options were for those with a maximum loan-to-income ratio of 5.5 times.
We designed these mortgages to meet the expected rise in demand. This was particularly true for first-time buyers and other borrowers. They aimed to complete purchases before the Stamp Duty holiday ended in March 2021.
As leaders in reintroducing 90% LTV mortgages, we mainly aimed to assist brokers in securing client funding. This initiative also served as a trial, providing insights into customer preferences for high LTV products. These insights helped us refine our strategy.
The response to our 90% LTV products exceeded expectations and was very popular among brokers. The trial period taught us valuable lessons. We have carefully analysed our experiences with 90% lending, which will guide our future strategies in this sector.
Our dedication to understanding and meeting our clients’ evolving needs remains strong.
We talk mortgages | What we learned
We received a very positive response from brokers. Our products were in demand from diverse clients.
We observed strong business volumes from northern England, Wales, and Scotland. Conversely, London and the South East showed less activity.
Additionally, there was a high level of applications for new-build properties. The applications we received were of extremely high quality.
Conversion rates to offers were very high. Notably, all the cases we handled were for purchases, even though remortgaging deals were also available.
Three-quarters of applicants chose our two-year fix. Meanwhile, a quarter preferred the medium-term security of the five-year rate.
Interestingly, almost eight out of ten applications (77%) came from first-time buyers, while the remaining 23% were from home movers.
We talk mortgages | What’s next?
We recognise the growing demand among expert mortgage brokers for expanded options at higher Loan-to-Value (LTV) ratios, and we are dedicated to re-entering the 90% LTV market for the long term. The insights gained from our recent trial conducted last month have been instrumental in shaping our strategy for high LTV lending.
We maintain our 85% LTV product offering, up to 5.5 times income. We are assessing our lending criteria in response to the evolving pandemic, considering business volumes, and evaluating our service levels.
Aldermore’s adaptable underwriting approach is centred on individual circumstances, enabling us to explore avenues for approval whenever possible. Recognising the imperative for increased 90% LTV options for your clients, we remain steadfast in our commitment to re-enter the market shortly. 
We pledge to provide brokers with a diverse range of choices and to adapt to the dynamic landscape of lending, ensuring that we meet the evolving needs of both brokers and their clients.
We’ve reached the end of our publication on “We Talk Mortgages | How Aldermore Supports Broker’s High LTV Clients | 2020.” Credit: Jon Cooper, Aldermore. Until next time, stay “Connect”!