Half of buyers want to see return to 100% mortgages to beat deposit barrier

Half of homebuyers would welcome a return to 100% loan-to-value mortgages to jump the hurdle of not being able to save a big enough deposit to purchase a home, research by mortgage lender and broker Ocean Finance reveals.

The survey of 2,000 people found that half of those who plan to buy a home within the next two years are in favour of a relaxation of the lending criteria including 100% LTV mortgages. Buyers of all ages want to see lenders offer zero-deposit mortgages again, with those aged 25-34 most keen.

100% LTV mortgages disappeared as part of a major overhaul of the financial market that led to the Mortgage Market Review (MMR) being introduced in April 2014. The Review, the biggest piece of mortgage regulation in a decade, tightened the rules on the size of deposit required to get a loan. It also placed responsibility on lenders to ensure borrowers only get a mortgage they can afford.

In practice, the new regulations have meant that borrowers face increased scrutiny about their income and spending, and often need to save large deposits to gain approval for a mortgage.

Gareth Shilton, Ocean’s spokesperson, says: “Buyers would welcome a return to 100% LTVs and many lenders would like to offer them. Many people trying to get on to the housing ladder struggle to get enough cash together for a deposit, then house prices rise further, and they find themselves stuck on a never-ending treadmill.

“The Mortgage Market Review states that lenders must ensure buyers can afford a mortgage. So it’s frustrating for those buyers who are able to prove they can afford a mortgage, but can’t raise a deposit because of their rent and living costs.

“It would be a brave lender who is the first to go back into the mass market with 100% LTVs, although others would no doubt follow suit.”