Average LTVs fall below 70%

Average LTVs for residential mortgages fell by 2% to 67% in Q2 2009 as banks remained cautious about lending, according to research by the Mortgage Advice Bureau.

LTVs on remortgages were 56% in Q2, a slight rise of 2% from Q1.

The latest index from the brokerage also revealed that buyers now need a deposit of at least £51,079 if purchasing a property worth £159,623 which is the average property price as revealed in the latest Halifax Index.

The average mortgage loan amount increased to £112,859 in Q2 2009, the highest quarterly average mortgage loan figure since Q2 2008.

Mortgage Advice Bureau also revealed fixed rate mortgages were the overwhelming choice for both homebuyers and those remortgaging due to low interest rates.

In Q2 2009, 89.4% of transactions were fixed rates, a 9% rise on Q1 2009 and the highest ratio of fixed rates to variable rates in any quarter for the past five years.

However, July saw the percentage of fixed rate mortgages fall by almost 10% to 80%, as banks raised their fixed rates.

The brokerage pointed out that there were signs that buyer confidence may be returning in Q2, as applications for purchases were up 27.7% in Q2 from Q1 and up 6.6% compared to Q2 2008. However, remortgage applications in Q2 2009 were down 50.6% from Q2 2008.

Brian Murphy, head of lending at Mortgage Advice Bureau, says: "These latest figures are a stark reminder that lending conditions remain extremely challenging.

"However, we have also noticed a significant shift in the market away from remortgages and towards purchase mortgages, which does indicate renewed buyer confidence."