LTV, or loan to value, is the size of a mortgage expressed as a percentage of the property's value. A 180,000 GBP loan on a 200,000 GBP home gives an LTV of 90%, with the remaining 10% covered by the deposit.
In one line: LTV measures how much of a property's value is borrowed, so a smaller deposit means a higher LTV.
How LTV works
Lenders use LTV to price risk. A lower LTV means more borrower equity, so rates tend to fall as the ratio drops past thresholds such as 90%, 80% and 60%.
On a 250,000 GBP flat bought with a 50,000 GBP deposit, the loan is 200,000 GBP, giving an 80% LTV. If the property later rises to 280,000 GBP and the balance falls to 190,000 GBP, the LTV improves to about 68%.
LTV is recalculated at remortgage using the current valuation, so rising prices or repaid capital can move a borrower into a cheaper band.
LTV vs equity
LTV and equity describe the same split from opposite sides. LTV is the borrowed share; equity is the owned share. An 85% LTV means 15% equity.
A falling LTV usually signals growing equity, which widens the range of remortgage deals available.
Primary source: FCA: Mortgages and home finance