Average LTV hits 70% as lenders relax grip on credit

The average loan-to-value (LTV) on new mortgages hit 70% in December for the first time since April 2009, according to figures from the Mortgage Advice Bureau (MAB).

Average LTV in December 2009 was 3% higher than in November 2009 (67%), suggesting banks are starting to relax their lending criteria and loan at higher levels again.

On new residential purchase mortgages arranged in Q4 2009 average LTV
was 68%, the same figure as the previous quarter.

More borrowers chose variable rate products over fixed rate mortgages for the second consecutive month, with variable rate mortgage transactions at 60% in December.  This compares to 53% of transactions in November.

Only 40% of mortgages arranged in December 2009 were on fixed rates compared to 80% in April 2009, suggesting variable rate mortgages are now the preferred choice amongst new borrowers as they back interest rates to stay low for the foreseeable future.

The average mortgage loan in December was £130,971 up from £119,415 in November, a 9.7% increase, while the average remortgage loan in December was £154,863 compared to £155,334 in November, according to the MAB.

Brian Murphy, head of lending, MAB, says: "Whilst a full-blown recovery is overly optimistic, there have certainly been signs over the past quarter lenders are easing slightly on their hard stance with regards to new business lending.

"With average loan-to-value on new mortgage transactions rising to 70% in December, this does suggest that the stringent lending environment that blighted the mortgage market in 2009 is likely to be less hostile in 2010. That's not to say that lending conditions don't remain extremely challenging, but even a little light at the end of the tunnel is cause for hope."