Call for lenders to resume normal risk-based lending and to increase loan to values (LTVs) to encourage first time buyers back into the market and avoid stagnation.

Make no mistake, first time buyers hold the key to building the momentum behind a sustainable recovery.  However, that will never happen if lenders do not step up to the plate and start lending at higher LTVs.  Now is the time to resume normal risk-based lending and to move back to the core competency of assessing risk and demonstrating underwriting skills.

Government-owned banks have recently made some effort to lend at higher loan to values, but what is really needed is a widespread commitment by all lenders to increase to a minimum of 90 per cent LTV.

In the not too distant past, 90 per cent LTV was the entry point for customers to provide a sensible commitment to the property, and for the lender to respect that commitment and price accordingly.  We are in danger of snuffing out the flickering candle of a housing receover before it has begun to generate some longer lasting light of optimism.

We firmly believe that a return to normal risk-based lending at reasonable and sustainable levels would breathe new life into the mortgage market, by giving first time buyers a more realistic and smoother entry into the market.  Despite widespread concerns about the potential recovery of the mortgage market, the long-term demographics and indicators remain strong.  We live on an island with some of the toughest planning rules in Europe and, with a population of over 60 million people, the long term demand for housingcan only increase.  We do not expect any recession, however deep, to make British people fall out of love with the dream of home ownership over the longer term.

Our message to all lenders is that we know how tough the pressures are on balance sheets, capital and profits, but housing and the supply of credit to potential homeowners, is fundamental to our society.  We have a culture of long term home ownership, a framework of regulation of advisers and quality processes.  We need you to step up the flow of mortgage funding to first time buyers, and higher loan to value products.  Not a return to the heady days of 2007, but sensible lending to sensible borrowers – at sensible prices.

Assessing and pricing risk is a core competency for lenders.  We believe it is time for lenders to step forward and demonstrate their underwriting expertise.

Written by Sue Aktins

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