Savills: High LTV interest rates on the up

Interest rates for higher loan-to-value (LTV) products are increasing as a result of coronavirus, it was revealed at the Association of Short Term Lenders’ (ASTL) virtual conference.

Lawrence Bowles, analyst at Savills Research led a session entitled ‘Outlook for the UK property market’.

Bowles noted that there is a direct correlation between higher LTVs and the stark rise in interest rates.

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Alongside the rise in rates, the number of mortgage products on the market at the higher LTV margins has reduced significantly since the beginning of the year.

Bowles added that “the criteria needed to access higher LTVs is tighter than ever before”.

He continued: “Buy-to-let [BTL] products, however, there is less of a premium to buy in.

“This is because there is an income stream attached to BTL and LTVs tend to be lower.

“This is why the interest rates at the higher LTVs within this area of the market have remained relatively stable.”

Looking at the short-term, Bowles expects to see interest rates showing a larger premium to the base rate and guild rates, as a result of that higher risk environment.

He added: “However, we would expect to see that premium erode again over the proceeding five years.

“We can anticipate a greater level of house price growth towards the end of that period and a higher amount of transaction activity unlocked by that increased affordability.”