Last reviewed: June 2026
TL;DR- LTV (loan to value) = mortgage amount divided by property value, expressed as a percentage. A £160,000 mortgage on a £200,000 property is 80% LTV.
- Lower LTV means less risk to the lender and typically means lower interest rates and more lender options.
- The most significant rate improvements occur at the standard LTV tiers: 60%, 65%, 70%, 75%, 80%, 85%, 90% and 95%.
- LTV improves over time through capital repayment (on a repayment mortgage) and property value growth.
How LTV Is Calculated
Loan to value is the outstanding mortgage balance divided by the lender's assessed value of the property, expressed as a percentage. LTV = (loan / property value) x 100. For a £180,000 mortgage on a property valued at £240,000, LTV = (180,000 / 240,000) x 100 = 75%. The property value used is the lender's valuation, not the purchase price (though for new purchases the lender's valuation typically equals the purchase price unless the property is valued below it).
LTV Tiers and Rate Pricing
Mortgage lenders price products in LTV tiers - the rate changes at defined LTV thresholds. Common tiers are 60%, 65%, 70%, 75%, 80%, 85%, 90% and 95%. The rate typically improves (falls) at each lower tier, with the most significant improvements usually at the transition from 90% to 85% and from 80% to 75%. The actual rate differential between tiers varies with market conditions. In general, each LTV tier step down provides a rate improvement, but the magnitude varies.
The rate difference between 60% LTV (the lowest tier at which most lenders price) and 95% LTV (the highest widely available) can be significant over a full mortgage term. On a £200,000 mortgage, a 0.5% rate difference equates to approximately £1,000 per year in interest, or £25,000 over a 25-year term.
Improving LTV
LTV can be improved in several ways:
- Larger deposit at purchase: every additional pound of deposit reduces the mortgage and the LTV.
- Capital repayment during the term: a repayment mortgage reduces the outstanding balance each month, improving LTV over time.
- Overpayments: overpaying above the contractual amount reduces the balance faster, improving LTV more quickly.
- Property value growth: if the property rises in value, the LTV improves even without any change to the mortgage balance.
At remortgage, if LTV has improved into a lower tier, the borrower accesses better rates. A key benefit of rising property values is therefore the improved LTV and consequently better remortgage rates.
LTV and Lender Choice
At lower LTV ratios, most mainstream lenders are available. As LTV increases toward 90-95%, lender choice narrows and specialist or government-backed products become more important. Above 95% LTV, very few products exist and those that do (family offset mortgages, specific springboard products) require additional family support. The number of available lenders at each LTV tier is a practical constraint on product choice beyond rate.
Frequently Asked Questions
Is the LTV calculated on the purchase price or the lender's valuation?
The LTV for a purchase mortgage is calculated on the lower of the purchase price and the lender's valuation. If the lender values the property at less than the agreed purchase price, the LTV is calculated on the lower (lender's) valuation, which means the effective LTV is higher than the buyer expects. This can occur with new builds (where the lender values at less than the off-plan purchase price) or where the buyer has agreed to pay above market value.
Does LTV change during the mortgage term?
Yes. LTV changes over time as the outstanding balance reduces (through repayments and overpayments) and as the property value changes (up or down). On a repayment mortgage, LTV improves over time even with no change in property value. If property values rise significantly, LTV may improve into a lower tier even within the existing deal period, though the benefit is only accessible at the next remortgage when a new valuation is obtained.
Can I remortgage to access a better LTV tier rate?
Yes. If LTV has improved into a lower tier since the existing mortgage was taken (through capital repayment or property value growth), remortgaging with a new valuation can access the lower-tier rate. A product transfer with the existing lender typically does not involve a new valuation, so the LTV improvement may not be reflected in the product transfer rate - a full remortgage with a new valuation is needed to benefit from an improved LTV tier.
What is negative equity?
Negative equity occurs when the outstanding mortgage exceeds the current market value of the property - LTV above 100%. This happens when property values fall after a mortgage at high LTV is taken. Negative equity restricts the ability to remortgage (lenders will not accept LTV above 100%), to sell without additional funds to cover the shortfall, or to port the mortgage to a new property. The best course of action in negative equity is to continue repayments and wait for either property value recovery or balance reduction to restore positive equity.
