High LTV choice shrinks in July – Moneyfacts
There were 214 high LTV products in June and 1,170 in March before the pandemic hit the property market and the UK went into lockdown.
As of July, there are 70 products at the 90 per cent LTV tier and 14 at 95 per cent – nearing a record low for 95 per cent LTV mortgages since May 2009 when there were three on the market.
Across all LTV tiers, fixed and variable rates, there are 2,728 mortgages on the market compared to 5,222 in March. Compared to June, this is only a slight dip on the 2,810 products which were available.
There is just one two-year fixed 95 per cent LTV product on the market, and it has a rate of 3.94 per cent. For a longer five-year term, there are five options at 95 per cent LTV with an average rate of 3.46 per cent.
At 90 per cent LTV, the average rate for a two-year fixed is 2.9 per cent and there are 16 deals on the market. For five-year fixes, there are 26 options with an average rate of 3.16 per cent.
Moneyfacts data also showed that across all LTV tiers, the average rate for two-year fixes dropped to a record low of 1.99 per cent while five-year fixes sat at 2.25 per cent.
This is likely due to the lack of high LTV offerings as for 90 per cent and 95 per cent LTVs the two-year fixed rate average increased by 0.6 per cent and 0.66 per cent respectively in July. Also, although the five-year average at 95 per cent decreased by 0.02 per cent, the five-year at 90 per cent increased by 0.59 per cent.
Eleanor Williams, spokesperson at Moneyfacts, said: “Our research shows that there still remains a dearth of available products. After a minor rally last month, July saw overall product choice fall again, starting the month with 2,728 products on offer.
“The majority of the available products at this level now are specialist options. This information could be disappointing to many would-be borrowers who may not have someone to guarantee, do not work in the specified job roles, or do not reside in the relevant postcodes, especially considering that while savings rates continue to plummet, increasing their level of deposit is likely to more be difficult.”
Availability waxing and waning
Williams added: “It seems that while lenders have the appetite to lend, intense customer demand being levelled at the small number of providers who have relaunched in these tiers is overwhelming, at a time when operational capacity is already stretched and there continues to be existing customers requiring support with payment difficulties in addition to new business underwriting.
“Therefore, until more lenders return to this space with products to support the clear borrower demand, it seems likely that we will continue to see an ebb and flow in availability.”
Stamp duty holiday won’t ‘fix’ property market, say experts
Homebuyers will not pay stamp duty on purchases up to £500,000 until 31 March, under the changes announced yesterday by Rishi Sunak.
The measure is widely expected to stimulate demand in the short-term.
First-time buyers had already benefitted from a threshold of £300,000 before they paid stamp duty, meaning this will be more of an incentive to movers, as well as investors.
However, there are fears that after an initial boost, the market could suffer.
Will Scoular, head of private client lending at Investec, said: “We must be cautious that the removal of the support in March next year could cause transaction volumes to stall again, creating somewhat of a delay in the impact of the crisis unless permanent reform is introduced.
“Meanwhile, unchanged stamp duty rates for homes worth more than £500,000 will continue to put the brakes on transactions and reduce the overall tax take.”
Lenders need to come back to 95 per cent LTV
The real difference for first-time buyers will be if lenders make a meaningful return to the market at 90 and 95 per cent LTV, critics suggested.
Martijn van der Heijden, chief of strategy at digtal mortgage broker Habito, said: “UK lenders are still withdrawing or heavily restricting the availability of lower deposit mortgage deals.
“This means that many would-be buyers looking to take advantage of this tax holiday will still struggle to get approved for the mortgage borrowing required to buy a home.
“Though some buyers who had budgeted for the tax could now use the saving to increase their deposit funds, many still won’t be able to buy unless these 90-95 per cent products make a return.
“Increased access to higher-value lending, to reduce the size of the deposit required, would be a very meaningful area of focus for lenders and the Treasury, when it comes to first-time buyers right now.”
Kevin Roberts, director, Legal & General Mortgage Club, welcomed the stamp duty cut but agreed that lenders needed to “step up”.
He said: “These are still uncertain times and there will still be challenges for consumers, namely ensuring that they have access to the mortgages they need to move forward with their plans.
“Independent mortgage advisers will be on hand to help first-time buyers understand their options, but we would also encourage lenders to step up and return to offering the higher loan-to-value mortgages on which many of these buyers rely.”
Help to buy extension preferable
Many critics were disappointed not to see an extension of the Help to Buy scheme as the chancellor’s tonic of choice for the market.
Jan Crosby, UK head of infrastructure, building and construction, KPMG, said the housing market has bounced back after lockdown fuelled by pent-up demand.
Crosby added: “The stamp duty cut may therefore not have been needed.
“More important is providing longer term clarity on help to buy, unlocking funding for SME housebuilders to play their part – many of whom have not been supported through CBILS and accelerating the provision of affordably priced key worker family accommodation across the country.”
Jeremy Duncombe, director of intermediary distribution at Accord Mortgages, echoed the sentiment and said raising the stamp duty threshold to £500,000 “will not ‘fix’ the market”.
He added: “There are a number of other measures which need to be given further thought and consideration by the government to make a longer term difference to those wanting to secure their own home.
“An extension to the current Help to Buy scheme which would allow for more borrowers, both first-time buyers and home movers to take advantage of the scheme would be a real boost to the industry.
“With the deadline for the current scheme looming, the delays to building work caused by the pandemic is threatening to exclude many home movers from accessing the financial support this initiative offers.”
Duncombe also suggested a review of the mortgage stress testing measures is needed.
He said: “To support more first-time buyers, a review of the current stress testing measures could make the shift from renting to owning more accessible for those who have a proven track record of meeting monthly rental payments.”
Ipswich Building Society pulls 90 per cent LTV mortgage
The 90 per cent LTV discount mortgage with a rate of 2.79 per cent will not be available after 5pm on Tuesday 30 June.
The mutual pulled its two- and five-year fixed rate 90 per cent LTV mortgages earlier this month in a move which it said would be a temporary response to the “unprecedented demand” it received for its high LTV range.
It said even though these products had been withdrawn to help the society manage applications, it continued to see “overwhelming” interest. Ipswich will work on processing the backlog of applications and said it will aim to relaunch as soon as it can.
For purchase applications, the society’s 75 per cent LTV fixed and discount products remain available, rising to 80 per cent for remortgage cases.
Ipswich is also withdrawing its expat buy-to-let two-year fixed three per cent deal, but the two-year discount option will remain in the range, up to 80 per cent LTV for both purchase and remortgage.
Additionally, the society has pulled its two-, three- and five-year fixed holiday let mortgages following the news that domestic holidays in the UK can take place from 4 July. In response, the lender has decided to manage the flow of applications it receives in this area.
The two-year discount option is still available up to 80 per cent LTV for both purchase and remortgage.
The society will still accept decisions in principle (DIP) until the close of business on 30 June for any of the withdrawn products.
Where a DIP has already been submitted, Ipswich will continue to accept fully packaged mortgage applications from intermediaries, with no deadline.
Richard Norrington, CEO at Ipswich Building Society, said: “In recent weeks we have been active in trying to assist borrowers and intermediaries in an uncertain market, moving quickly where we can to introduce new products and improve lending criteria.
“We take great pride in our manual underwriting approach as it allows us to accept applications from borrowers who may be turned down by lenders who make decisions on an automated basis.”
“However, assessing each and every application on a case-by-case basis is inherently more time-intensive than applying a computer-based algorithm,” he added.
“Therefore, to maintain our high standards of service, and to give each application the attention it warrants, we feel this decision is in the best interests of both our direct customers and those applying via our intermediary partners.
“By staying active in the market longer than others, we are pleased we have been able to help some buyers and support the property market as a whole and look forward to returning to higher LTV lending and other areas of business when we have the capacity,” Norrington said.
Accord offers 90 per cent LTV deals to first-time buyers
The lender will be offering a five-year fixed rate at 2.99 per cent with a £495 product fee and a fee-free option priced at 3.09 per cent. Both deals come with a free valuation.
To be eligible for the products, at least one applicant must be a first-time buyer.
There are no changes to lending criteria or loan sizes.
Accord Mortgages director of intermediary distribution Jeremy Duncombe said: “Our commitment to the housing market has not changed and our new range of products aims to help first-time buyers with smaller deposits, a group which has so far been offered limited choice.
“This will help the purchase market and keep chains moving, hence allowing subsequent buyers to keep moving on.”
Duncombe said the bank took the decision to reluctantly withdraw from 90 per cent lending just over a week ago to bring its service levels back on track.
He added: “We hope by offering longer term fixed-rate products borrowers are given confidence in managing their payments in a very uncertain market.
“We know the demand is there and we have streamlined our products to ensure we can support brokers and their clients on the purchase journey.”
TSB halts 85 per cent LTVs and HSBC hikes rates as high LTV choice dwindles further
Just two days ago TSB removed a raft of its mortgages at 85 per cent LTV, and now has removed any remaining deals at this level.
This includes house purchase, remortgage, shared ownership and shared equity products.
TSB head of intermediary mortgages Beverley Bradford said: “As part of our regular review of our products, we have removed a set of products while we make changes to our existing range of mortgages.”
At the same, time HSBC has raised rates on a number of two-, three- and five-year fixed rate mortgages at 85 and 90 per cent LTV.
The bank is the only big lender to have offered 90 per cent LTVs throughout the coronavirus outbreak and lockdown.
However, HSBC has put limits on daily lending at this level to manage demand.
Some brokers report that by 8.30am the day’s cap has already been filled.
It comes after Accord and Virgin re-entered the 90 per cent LTV market after the property market reopened, only to withdraw this week citing high levels of demand.
Tipton & Coseley pulls 90 per cent deals
A number of building societies have followed suit and taken 90 per cent LTV off the market.
The Tipton & Coseley Building Society is one of the latest to remove deals at this level.
However, Coventry Building Society has bucked the trend and is launching two deals for borrowers with a deposit of 10 per cent on Friday.
Phil Bailey, sales director at Twenty said: “It’s sad and even maybe a little difficult to see these 90 per cent LTV products being removed from the market.
“From a lenders’ perspective, there’s a need to balance a complex mix of rates, default risk, house price risk, and the volume of operational resource available to them to process mortgages.
“Getting 90 per cent LTV mortgages can often take more manpower at the lender’s side, and with furlough, people off ill and all the other domestic and personal challenges that Covid brings, it’s no real surprise that these products are being withdrawn.
“When I speak to lenders, it’s clear that they do want to lend at 90 per cent.
“Margins are good at that level and it’s clearly important for the chains to work to draw in first time buyers with 90 per cent products.”
He added that this was a real challenge for the government which has backed a housing-led recovery that could be at risk of faltering if products are not available in the market to satisfy demand.
Bailey noted the volume of products available is still only around 50 per cent of pre-Covid levels, although this had dropped as low as 33 per cent at one point.
Ipswich BS temporarily pulls 90 per cent LTV fixes due to high demand
However, the mutual will keep offering its discounted standard variable rate 90 per cent LTV mortgage in an effort to continue helping first-time buyers and low deposit borrowers.
Ipswich BS said any intermediaries with outstanding decisions in principle should submit applications before products are withdrawn at 5pm on 19 June.
Lenders such as Accord, Virgin Money and Furness Building Society have also put a pause on high LTV mortgages citing a rise in demand due to the lack of alternative options.
Although some lenders returned to low deposit mortgage lending last month, many are still not offering deals beyond 85 per cent LTV putting the providers who are still lending at this tier under pressure.
Earlier this week, Chris Sykes, consultant at Private Finance revealed HSBC was reaching its daily limit on 90 per cent LTV mortgages as early as 8.30am.
Re-enter as quick as possible
Ipswich BS said it will review its position on 90 per cent LTV fixed rate mortgages and will actively seek to re-enter the market as quickly as possible.
Richard Norrington (pictured), CEO at Ipswich Building Society, said: “We have been receiving three times what was already a high volume of telephone enquiries, and with many of our staff still operating remotely, our capacity to handle these calls and process applications is somewhat reduced.
“We hope that both intermediaries and direct applicants will understand the necessity to briefly stem this flow in order to maintain good service levels.
“As a society, we understand how vital first–time buyers are in keeping the entire housing market moving, which is why we’ve taken the decision to leave the 90 per cent discounted product in our range,” he added.
Brokers urge Nationwide to offer 95 per cent LTV deals through advisers
Intermediaries say they are losing clients to the high street giant because it is one of the only lenders offering mortgages to borrowers with a small deposit, but only through its branch network.
They are calling on the lender to end the dual pricing practice and help them to support their clients during the pandemic.
Mortgage broker Rachel Dixon of RH Dixon met with clients at the end of May, researched the best mortgage for their needs and completed an agreement in principle.
When they returned to proceed with her recommendation, the high LTV deal had been withdrawn from the market.
Her clients did not meet HSBC’s affordability criteria leaving her with one option, to recommend they go direct to Nationwide for their mortgage.
She said: “I have supported Nationwide a lot over the years and this situation is fairly frustrating. It is only right they show us the same support.”
Not told about dual pricing
On 30 March, Nationwide withdrew its lending above 75 per cent LTV through intermediaries. Less than a month later, the society increased lending back up to 85 per cent.
Mortgages at 95 per cent LTV have continued to be available through its branch network throughout the coronavirus crisis.
But some brokers say they were not told by the society it had introduced dual pricing and were only beginning to hear the news as other lenders pulled out of the market.
Accord, Virgin Money, Clydesdale and Furness Building Society have all removed their 90 per cent LTV ranges this week leaving HSBC and a handful of small building societies left to serve low deposit borrowers through the intermediary market.
George Williamson, director of Mortgage Advice Brokerage, said he had heard from other brokers that they were losing clients to Nationwide’s direct proposition but no one had been told directly by the business development manager (BDM) that the society had started dual pricing.
He said: “It just makes us look stupid to our clients when we say we can’t help because there isn’t anyone lending to borrowers with a five per cent deposit, and then they come back and tell you they can go straight to Nationwide.”
Nick Morrey, product technical director, John Charcol, added: “Nationwide’s 90 per cent plus range is a step in the right direction.
“The society is serving its members by offering something that the rest of the market is not. But the sooner Nationwide opens up to all channels, and other lenders return to this market the better.”
A Nationwide spokesman said: “We are working on a solution which offers a consistent loan to value approach across all channels and will be in a position to update our proposition soon.”
Virgin Money pulls 90 per cent LTV deals putting the strain on HSBC
Virgin Money said it had taken the decision to temporarily cut back its lending to 85 per cent LTV to protect its service levels, after being one of the only lenders left in the market to offer high LTV deals.
Before last night’s withdrawal, the bank had raised rates on its 90 per cent LTV range by up to 0.49 per cent.
A Virgin Money spokeswoman said: “Following a strong increase in demand, we are temporarily withdrawing our 90 per cent LTV purchase, remortgage and new build products in order to protect our service to existing customers and applications.
“Our 85 per cent LTV products will continue to support customers with small deposits, and we hope to be back in the 90 per cent LTV market soon.”
HSBC is now the only big high street bank still offering 90 per cent deals through intermediaries.
But the bank is hitting daily limits on the amount of lending it will do at 90 per cent loan to value (LTV) by 8.30am, according to brokers.
The bank is operating a ‘funds booking’ system that caps availability but guarantees that some lending at this level is available each day.
HSBC announced that it may have to limit lending at 90 per cent LTV in April.
But brokers have reported that the lender is now very quickly reaching its daily limit.
Chris Sykes, consultant at Private Finance, said: “Lenders are limiting the amount of high loan-to-value mortgages they will undertake each day, with lenders like HSBC only allowing a certain number of these products to be processed each day. They open at 8am. By 8.30am they’re all gone.”
It comes after Accord also pulled out of lending at 90 per cent LTV citing overwhelming demand.
Many lenders withdrew from the market in March when the coronavirus outbreak sent the property market into lockdown.
Some banks and building societies returned as physical valuations restarted. But the choice has still been limited compared to pre-coronavirus levels.
HSBC has continued to offer 90 per cent LTV mortgages throughout the coronavirus, and said it has no plans to withdraw from the market.
The bank stopped offering 95 per cent LTV deals in April and has yet to reinstate them.
Mortgage deals at 95 per cent LTV continue to drop – Moneyfacts
The number of 95 per cent LTV two-year fixed rate mortgages on the market fell from 11 in May to just six at the beginning of June, according to analysis by Moneyfacts.
Five-year deals in this bracket are just as scarce falling by two so that just nine products in this category remain available to buyers.
However, one step down the risk curve at 90 per cent LTV the situation is improving notably.
The number of 90 per cent LTV deals available to buyers looking for a two-year fix shot up by 31 products month on month from 24 to 55. Five-year fixes in this bracket doubled from 25 to 51 in June.
In the 85 per cent LTV bracket, the availability of two-year fixed rates increased by 29 from 87 in May to 116 in June. Five-year fixed rates increased by 33 deals, also bringing the total number of deals to 116.
Moneyfacts spokeswoman Rachel Springall said: “Borrowers may need to wait a little longer for providers to accommodate them if they only have a five per cent deposit to buy their first home, as there has been no improvement to growth in the choice of deals available to them over the past month, it has in fact shrunk.
“As lockdown eases, individuals return to work and attempt to discover normality again they may well be starting to house hunt.
“However, it may be a bit premature for them to buy a home imminently and instead they may wish to wait for more competition to return to the mortgage market for low deposit deals.”
Rates drop to record lows for small deposit borrowers – Defaqto
The firm pointed out that over the last year the average interest rate on a 95% loan to value (LTV) two-year fixed rate deal has dropped from 3.98% to 3.46%, while rates available on three- and five-year deals have also fallen over the same period.
The increase in competitive deals for low deposit borrowers has coincided with a jump in the number of such products in the market. Defaqto noted that there are now 290 95% LTV deals available, up by almost 50% from the 199 deals on the market 12 months ago.
There has also been an increase in the number of lenders offering these deals from 52 to 58.
Brian Brown, head of insight at Defaqto, pointed out that buying a home is a big investment, and rising prices have kept home ownership out of reach for many.
He added: “It looks like the cost of buying a home has just got a bit easier for first-time buyers as prices have finally stopped rising and mortgages are cheap.”
The results echo data from AmTrust and Moneyfacts which found 95% LTV deals were increasing in number and falling in rate.
According to the latest data from the Office for National Statistics, annual house price growth has dropped to the slowest rate seen since 2013, while E.surv has suggested the jump in mortgage approvals seen in January was driven by borrowers with small deposits.