Highest Loan to Value Mortgage Companies
January 22nd, 2008 | by admin |The loan to value is a way of assessing a mortgage lenders balance sheet.
The Northern Rock has the UK’s largest ratio of mortgage to house value. On average it lends 59% of the value of a home. For subprime lending this rises to 68.3%.
- Northern Rock 59%
- Bradford & Bingely 54%
- Royal Bank of Scotland 47%
- Alliance & Leicester 46%
- Lloyds TSB 44%
- HBOS 43%
- Nationwide 39%
- Barclays 32%
- HSBC n/a
For new mortgage lending, in the first half of 2007, Northern Rock lent an average of 78% of the value of a home. The next closest lender was Alliance & Leicester with 67%
One of the reason is that Northern Rock has sold a high % of 100% mortgages, it has also offered 125% mortgages. Therefore the value of its loan is a high % of the value of its assets (homes secured for a mortgage)
The problem comes if there is a fall in house prices. If house prices fall, then the ratio of loan to value will increase, making Northern Rock’s balance sheet look even worse. Because it has a high % of 95% - 100% mortgages many mortgages will show negative equity
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