85% loan to value (LTV) loans are creeping back

The news that Leeds Building Society has just launched a 5 year fixed rate mortgage with up to 85% loan to value is heartening for borrowers and lenders alike.

The credit crunch has hit both lenders and borrowers hard.  Banks and Building Societies have suffered huge losses as the extent of poor lending practises became apparent.

Suddenly adverse to risk, these lending institutions have been restricting loans to all but the very most credit worthy person or business.

Even businesses with excellent prospects and balance books have been struggling to raise finance.

I know of a company that wanted to borrow a large sum of money to expand, a move that would have been of tremendous benefit to the future of the business.

Even though that company could have safely paid back the loan within a year, it was refused by bank after bank.

Mortgage borrowers have been in the same boat.  Only those who can put down a 40% deposit and have squeeky clean credit histories have been able to secure mortgages.

Although the situation is improving, finding finance is still difficult.  You must be a low risk prospect for the lender so an excellent credit history and a large deposit carry much weight.

The move by the Leeds and other lenders in offering 85% LTV loans shows a gradual, and welcome, thaw in the finance industry.

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