Just months after the Bank of England put a cap on risky 90%+ mortgages, they are back on offer.
The increase has been catalysed by lenders falling profit margins crushed by oversupply and falling demand for housing throughout the UK.
Bank of England data published at the start of April revealed that, while mortgage approvals had declined for applicants with 25% or more deposits, borrowers looking for mortgages worth over 90 percent of the home’s value had gone for the first time in almost a year.
New regulatory measures recently provided to the Bank of England from the Treasury allow it to cap higher loan to value mortgages if they believe them to threaten financial stability. Last year it put limits on mortgages offered to applications with a high loan to income ratio. The effect of these new measures have seen the UK housing market slow down considerably.
The quarterly credit conditions survey conducted by the Bank showed a substantial decline in mortgage demand in the first financial quarter of 2015, which represents the third quarterly fall in a row. Decreasing demand and more competition has resulted in a reduction in mortgage profit levels for lenders.
The greater level of competition in the mortgage market may be propelling more banks into issuing high loan to value mortgages. A measurement of the net percentage balance, which shows the gain or decline in the number of loans worth upwards of 90 percent of a property’s total value, reported a positive figure in the first quarter of the 2015, with a significant jump to 9.0 from the -18.9 reported in the final quarter of 2014.
Bank representatives reported that lenders admitted there was a slight change in the willingness to issue mortgages to applicants with an loan to value ratio above 90 percent.
Housing remains one of the country’s biggest internal risks to economic stability, although these risks have not gone up recently, according to the Bank of England.