The LTV statistics were drawn from over 6,000 decisions worth over £1.3 billion submitted to edeus from September 2006 to date and are the first to be issued from edeus regarding the UK adverse mortgage market and its borrowers.
At a time when the adverse mortgage market has been under scrutiny due to the issues faced in the US, edeus has found that the average LTV is 76.7%. According to CML data, the average LTV for house purchase in 2006 was 80% and for first-time buyers 90%. edeus said this shows that the average adverse borrower has significant equity in their properties.
The fact that LTVs for the adverse sector are below those for house purchasers and first-time buyers in general contradicts speculation that adverse borrowers are set to experience similar problems to those of their US counterparts. At less than 80% LTV, edeus stated it was obvious that lenders and brokers were acting responsibly in this market and were ensuring adverse borrowers have adequate equity.
In the US adverse mortgage market LTV levels are often close to 100% and in some cases higher than 100% LTV, this has meant that many properties have dropped into negative equity. It is well known in the industry that lending processes are much more robust in the UK and haven't experienced the criteria creep that has happened in the US. With demand for property continuing to outstrip supply it is also very unlikely that UK house prices will fall.
Nicola Severn, head of PR for edeus, said: "These findings demonstrate that the UK market is far from vulnerable. LTVs are lower in the adverse market than in the general UK market as a whole. Adverse borrowers are not mortgaging themselves to the hilt, they know what they can afford and are able to service debt. There will of course always be those who struggle to meet repayments but the clear message from this data is that there is definitely no need for panic."
