High-LTV mortages bounce back

The high loan-to-value mortgage – widely blamed for the troubles of the likes of Northern Rock in the financial crisis – has made a dramatic comeback in the north of England as the Government’s Help to Buy programme starts affecting the market in key marginal constituencies.

Figures from e-surv, the property surveying group, showed one in five loans made in the northern counties are now for properties where the buyer is putting downpayments of 15 per cent or less.

In the North-east and Cumbria more than 20 per cent of loans in August were high-LTV. In Yorkshire the figure was 18 per cent.

Across the country, the number of high-LTV mortgages leapt 50 per cent on a year ago.

Critics of the Government’s policies on state support for mortgages say it is a cynical way of securing Tory votes in crucial northern constituencies, as it has the effect of propping up house prices and creating homeowners out of people who would be unable to afford a mortgage otherwise. These people will also be in the high-risk category when interest rates return to more normal levels.

The Government counters that the schemes help boost the economy and improve people’s lives by getting them on the housing ladder. Today, the Help to Buy scheme is extended to properties worth as much as £600,000, guaranteeing loans of up to 95 per cent of the purchase price.

Figures yesterday showed house sales hit a four-year high across the UK last month. The average number of properties sold per chartered surveyor reached 18.7 per cent, according to the RICS Residential Market Survey. That marks the highest figure since 2009 although is still well below pre-crisis levels.