Mortgage defaults rise 'unexpectedly' | Money | guardian.co.uk

Mortgage defaults rise 'unexpectedly' | Money | guardian.co.uk

The number of households defaulting on mortgage loans increased "unexpectedly" in the first three months of the year, and is expected to rise further, according to the Bank of England. There was also an increase in the number of higher loan-to-value (LTV) mortgages on the market between January and March.

In its latest quarterly credit conditions survey of lenders, the BoE reports that mortgage providers suffered increased losses from defaulted loans in the first quarter of the year, and these losses "were expected to increase a little further" in the second quarter.

But mortgage lenders have become more willing to lend to first-time buyers with higher LTV mortgage products because they were not making enough money from less risky lending. The report said: "Lenders commented that risk appetite towards borrowers with high LTV ratios (greater than 75% LTV) had increased as competition had limited margins on lending to borrowers with low LTV ratios."

According to Andrew Hagger of moneynet.co.uk, there are 1,090 mortgages on the market with a LTV greater than 75% – a marked improvement on conditions at the end of last year. "Availability has gradually edged up, but even though the rates are out there, for borrowers to be accepted they have to have an exceptional credit record and meet the criteria quite comfortably.