Panic in mortgage market “overdone”

Price comparison website, mform.co.uk, is offering encouragement to those seeking a home loan in a mortgage market that has been described as in “melt down”.

The online brokerage believes the panic in the mortgage market has been “overdone” and that borrowers can still secure competitive deals.

Research from mform shows that the interest rate gap for customers with 90% loan-to-value (LTV), compared to borrowers with 50% LTV, is just 0.19% on the best two-year deals and 0.04% on the best five-year deals.

Furthermore, a typical rate on a two-year deal with a 50% LTV is 5.2%, compared with 5.39% for 90% LTV. On five-year deals the rates are 5.59% and 5.63% respectively.

Francis Ghiloni of mform, says: “Mortgage customers are undoubtedly facing challenging times but they are not as bleak as is being painted. People coming off two, three and five-year fixed rate deals this year will face higher monthly payments. However they will have benefited from house price increases and that will have enabled them to build equity and to substantially improve their loan-to-value.”

For example, average mortgage advances in 2005, 2006 and 2007 were £114,078, £126,012 and £134,801 respectively.

With the average UK house price now around £196,000 homeowners borrowing during these years should now have lower loans-to-value.

According to mform the best deals for customers with loans-to-value of 50% come from lenders such as Marsden, Principality, First Direct, Stroud & Swindon BS, Cambridge and West Bromwich BS.

For people with 90% LTV the most competitive lenders include Principality, HSBC, First Active, Market Harborough and Monmouthshire BS.

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