Abacus Daily Debt News

Mortgage seekers ‘hit by LTV difference’

A ten percentage points difference between loan-to-value (LTV) mortgages of 75 per cent and 85 per cent may mean customers have to pay a premium on top of the extra loan amount, according to one comparison site.

PR and communications manager Andrew Hagger of Moneynet noted that on a five-year fixed-rate mortgage spread over 25 years where the house is worth £200,000 the extra amount customers would need to borrow to get an 85 per cent LTV deal would be substantial.

Over the first five years buyers must pay an additional £236 a month to receive the £20,000 difference between a 75 per cent loan and an 85 per cent deal in this instance.

Using Nationwide Building Society as an example, he stated that £6,431 of this was the result of interest loading on the higher amount.

This could lead to mortgage owners being charged with loaded interest rates despite making payments on time due to their property value decreasing.

Earlier this month, head of mortgages at comparison site moneysupermarket.com Louise Cuming stated that recent activity in the level of rates provided by lenders was unlikely to help consumers.

By Francis Finch