Its two-year fixed rate at 70 per cent loan-to-value (LTV) for remortgage will be cut by 0.05 per cent to 1 per cent, whilst the rate for its similar purchase product will be reduced by 0.03 per cent. Both products are subject to £1,249 fee.
The lender’s two-year fixed rate at 75 per cent LTV for remortgage will now stand at 1.24 per cent, a reduction of 0.05 per cent.
The lender also cut the rate for its five-year fixed rate at 75 per cent LTV for remortgage by 0.02 per cent to 1.5 per cent. The fee has also been reduced by £250 to £1,249.
The fees for its five-year fixed rate at 70 per cent LTV and 75 per cent LTV for purchase has simultaneously cut by £250 to £1,249. The 75 per cent LTV product has had £250 cashback added.
The three-year fix is priced at 3.99 per cent while the five-year fix has a rate of 4.09 per cent. Both products have no fee.
The bank has also reduced rates on its standard residential and new-build range by as much as 0.20 per cent.
Products to see the largest cuts include the 85 per cent LTV two-year fixed purchase and remortgage deal with a £999. This now has a rate of 2.43 per cent, down from 2.63 per cent.
Another product to receive a 0.20 per cent reduction is the purchase and remortgage five-year fixed mortgage at 85 per cent, which is priced at 2.95 per cent.
The bank also pulled two of the broker exclusive products which were launched two weeks ago. Both at the 85 per cent LTV tier, the two-year fixed with a rate of 2.53 per cent with a £199 fee is no longer available as well as the five-year fixed fee-free option with a rate of 2.85 per cent.
The product changes are effective from today.
At 70 per cent LTV, there is a two-year fix with a £1,249 fee, with a rate of 1.08 per cent. The five-year alternative has a product fee of £1,499 and a rate of 1.22 per cent.
Within the 75 per cent LTV band, there is a two-year fixed product priced at 1.29 per cent, with a £1,249 product fee. The five-year fixed option has a rate of 1.52 per cent and a £1,499 fee.
The 70 and 75 per cent LTV mortgages have minimum loan sizes of £350,000.
At 85 per cent LTV, the £199 fee-paying two-year fix has a rate of 2.53 per cent, while the fee-free five-year alternative is priced at 2.85 per cent.
These products are available for purchase only and go live on Monday.
The bank withdrew two purchase products at 85 per cent LTV. These include the two-year fix with a £999 fee and rate of 2.63 per cent, as well as the fee-free five-year fix at 3.15 per cent.
TSB refreshes range
TSB has reduced rates on its five-year fixed remortgages up to 75 per cent LTV by 10 basis points.
It has also replaced its two and five-year fixed with a three-year early repayment charge, purchase and remortgage products at 60 to 75 per cent LTV, with 60 to 70 per cent and 70 to 75 per cent LTV mortgages.
Additionally, the bank added two-year tracker products at 60 to 70 per cent LTV for purchase and remortgage.
Despite the gradual reopening of businesses as lockdown eases and more lenders pushing up the loan to value curve (LTV) to 95 per cent, self-employed borrowers are still seen as risky business.
According to the latest Mortgage Solutions poll, some 61 per cent of brokers said the mortgage outlook was not improving for homeowners who worked for themselves, while 22 per cent said they thought it was.
Santander was applauded by brokers for changing its lending policy to discount the 20/21 set of accounts for self-employed borrowers who have suffered an out of ordinary loss of earnings. But the other big banks said they did not plan to do the same.
NatWest is reviewing its current policy that excludes borrowers who have applied for a Self-Employment Income Support Scheme (SEISS) and Barclays is also believed to be looking at its current rules but neither have indicated they will adopt Santander’s approach.
Nick Morrey, product technical manager, John Charcol, said: “Santander is holding a blazing torch for the self-employed.
“Most lenders look at the latest two years accounts. But the 20/21 year could look pretty shocking, however, it would be a blip on an otherwise normal record with HMRC.
“By ignoring that year and taking off any commitments for government assistance the bank is practising responsible lending. Looking at 19/20 accounts and current business bank statements is a huge leap forward compared to how underwriters have been forced to ascertain affordability for the last ten years.”
Because lenders use the average earnings from the last two years accounts, the pandemic stricken tax year of 20/21 will still be hampering borrowers’ mortgage applications until 2023 unless lenders rethink their policies.
Currently, the 20/21 accounting period is not required by most lenders as they are still happy to work from 19/20 as the latest accounting year. But that will change as the year progresses says Morrey.
“This situation will start to bite in quarter four,” he said. “At that stage lenders will start to say that the 19/20 accounts are too old to rely on and so 20/21 accounts will start to be requested.
“We are hoping to see other banks take a pragmatic view of the plight of the self-employed before Q4.”
Simon Butler, head of mortgages at self-employed specialist CMME, said his recent talks with lenders have indicated a willingness to relax underwriting policies for self-employed borrowers but lenders are being tight lipped about when changes will be implemented.
Despite Santander’s decision to disregard 20/21 accounts, its LTV for self-employed borrowers remains conservative at 75 per cent.
Morrey says until other lenders adopt a similar income policy to Santander, the bank is unlikely to raise the LTV limit.
Nationwide, meanwhile, has no plans to relax its rule around contractor income.
Before the pandemic, the building society used 80 per cent of the annualised day rate. This was pulled back to 50 per cent and there are no plans yet to revert to the original calculation.
Butler said CMME was placing more than 300 cases a month with Nationwide before it curtailed its income policy. Now they rarely use the lender.
An obstacle facing many of his contractor clients is not a specific self-employed issue, said Butler. Instead it is a tightening of credit scoring in the higher LTV bands that was stopping deals from progressing.
He said a lot of borrowers who are self-employed prefer to take a higher LTV mortgage than use up all their savings getting together a bigger deposit. But securing a high LTV mortgage was proving tough.
“Although lenders are presenting options in the high LTV bands there is a lack of appeal to lend in this part of the market so credit scoring is very restrictive,” he said.
From Tuesday 20 April, borrowers with a five per cent deposit will be offered a choice of three deals backed by the government’s mortgage guarantee scheme.
At 3.99 per cent, borrowers can opt for a two-year tracker or a three-year fixed rate mortgage. At 4.09 per cent families can fix for longer with a five-year deal.
Five-year fixed rates are a compulsory requirement for lenders using the mortgage guarantee.
None of the 95 per cent mortgage deals come with a product fee and all have a free valuation.
Borrowers who want to buy a new-build property will need to use the Help to Buy equity loan scheme. The Help to Buy equity loan scheme is now only available to first-time buyers.
Repayment mortgages only will be offered on houses priced up to £600,000 or flats and leasehold properties up to £400,000. Under the terms of the scheme, all deals are open to first-time buyers and homemovers.
Brad Fordham (pictured), head of mortgages at Santander, said: “We know that buying a home is expensive and finding the money for a deposit and the upfront costs can sometimes prove a barrier to potential homeowners.
“We’re pleased to be part of the government’s mortgage guarantee scheme by offering customers a range of 95 per cent LTV mortgages with the additional support of no upfront fees and a free valuation.”
Chancellor Rishi Sunak announced the 95 per cent mortgage guarantee scheme during the March Budget.
Under the terms of the scheme, the government will guarantee the amount of the mortgage lending over 80 per cent, which is 15 per cent of the 95 per cent loan to value mortgage.
Borrowers will be subject to Santander’s normal affordability checks. The mortgage deals are available through the intermediary and direct channels.
From Tuesday, brokers will exclusively be able to use the calculator for ‘Covid-affected’ clients who want to disregard their 2020/21 accounts because the pandemic has damaged their earnings, to find out how much the bank is prepared to lend.
The bank has changed its lending policy to exclude the 2020/21 tax year for self-employed borrowers who have suffered an out of the ordinary loss of earnings.
Covid-affected, said Santander, also refers to borrowers who have relied on one of the government’s support measures such as the Self-Employment Income Support Scheme or the Coronavirus Business Interuption Loan Scheme, or a tax deferral.
The lender said it will be taking into account future Covid-19-related liabilities and they will be treated as a business commitment.
An additional layer of criteria means that to be accepted under Santander’s Covid-19 accounts exception, businesses must have been trading for at least 90 days after reopening.
Santander revealed its criteria changes to brokers yesterday, and has been praised by the broker industry for its approach.
However, there are concerns over the impact it will have on the bank’s service levels.
Business as usual for 2020/21
If borrowers want to use their 2020/21 earnings, head of business development mortgage division, Graham Sellars said it was business as usual and brokers do not need to call unless they needed support.
Speaking to Mortgage Solutions, Sellars (pictured) said: “Half of Santander’s self-employed borrowers have not seen any impact on their businesses.
“The other half have been affected in varying ways, from being shut throughout each lockdown like hairdressers, for example, or just losing earnings in the first lockdown like tradesmen for instance. Whatever the scale of the damage, we see 2020/21 as an aberration, and not a normal trading period.”
Brokers want to see more lenders follow Santander’s lead.
Simon Butler, head of mortgages at CMME, said: “This is a strong indication from one of the UK’s largest lenders that they value the self-employed sector.
“Last year had a detrimental impact on the finances of many small businesses and the attitude across the mortgage industry has been excessively cautious at times, rather than supportive of business owners.
“We hope other lenders take note of this and review their individual criteria as there are many ways to approach adversity, as Santander have shown this week.”
‘Pragmatic approach’
Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, also welcomed the move but had reservations over how the policy would be applied in practice.
“This is a good idea overall. The self-employed have had a bit of a tough year for reasons outside of their control due to the current conditions so it will allow them to provide figures for when their businesses were running under normal trading conditions.
“Having said that, Santander will still take a view of what their likely future trading will be post-Covid and not all will pass muster, but I think it is a fairer way of judging income and so I think it’s a very pragmatic approach.”
Sebastian Murphy, head of mortgage finance at JLM was concerned that Santander’s keenness for brokers to talk through cases and a move towards more manual underwriting may put its service levels under pressure.
“This is a really positive step and hopefully other banks will join them but the communication to brokers could have been better.
“I do have concerns that this decision will drive their service levels down to the levels we had to deal with when they were underwriting self-employed applications last year.”
Until the calculator is live the bank has asked that brokers call it to discuss Covid-affected cases.
Borrowers not using a broker will need to contact the bank to discuss their circumstances.
However it has not released many product details including interest rates, fee information and fixed or variable periods.
The deals are only available for first-time buyers and movers and do not include remortgages or self-employed borrowers. New build, shared ownership and Right to Buy applications are also excluded.
The government scheme permits a maximum property price of £600,000, the property must be the only residential property owned by the applicant and must be owner-occupied, and the mortgage must be on capital and interest payment basis.
Additionally Santander limits the maximum value of flats it lends on to £400,000.
Therefore, the maximum loan is £570,000 for non-new build houses and £380,000 for non-new build flats. And the maximum loan to income is 4.45 times.
For employed applicants Santander will require the latest payslip plus the latest three months’ personal bank statements.
Applicants must complete the lender’s mortgage guarantee declaration to confirm that they do not own any other property.
Other launches
Yesterday Halifax was the first lender to reveal the details of its offering through the government’s 95 per cent LTV guarantee scheme.
It is launching two-year and five-year fixes with £999 fee and fee-free versions of each product – the two-year fixes are at 3.73 per cent and four per cent respectively with the five-year options at four per cent and 4.2 per cent each.
Instead, from 19 April Santander will base its income assessment on the 2018/19 and 2019/20 accounting periods.
However, the lender said it will need to take into account future Covid-19-related liabilities such as paying back loans or deferred tax.
And it is urging brokers to call it before submitting cases where:
- the client’s business and/or income has been adversely affected by coronavirus; and/or
- the client is using 2020/21 figures for income assessment; and/or
- the client has any future Covid-19 related liabilities.
Deduct future liabilities
In a message to brokers Santander said: “From Monday 19 April, we’ll be changing the way we assess self-employed income for all new residential applications where the business and/or income has been adversely affected by Covid-19.
“Where your client’s business and/or income has been adversely affected by Covid-19 we’ll discard the 2020/21 accounting periods (if available), and our income assessment will be based on the 2018/19 and 2019/20 accounting periods.
“It will be necessary to deduct any future Covid-19 related liabilities from the net profit/profit (after tax) as these will be ongoing costs for the business e.g. bounce-back loans, BBILs or CBILs repayments and deferred tax liabilities.”
All full mortgage applications submitted by 9pm on 18 April will not be affected by these changes.
Any applications submitted from 6am on 19 April, or where a material change is made to an application submitted before 9pm on 18 April, will be assessed on our updated lending policy.
Buy-to-let applications are unaffected by this change.
It will close three of its Swindon offices, leaving 3,000 staff to either relocate to its nearby headquarters, work from home or do both.
A survey conducted with Ipsos Mori found 57 per cent of people wanted to work from home full-time after Covid-19 restrictions were lifted. A further 36 per cent wanted a mixture of home and office-based working.
Joe Garner, chief executive of Nationwide Building Society, said: “The last year has taught many of us that how we do our jobs is much more important than where we do them from. We have listened and learned, and we are now deciding to move forward, not back.
“We are putting our employees in control of where they work from, inviting them to locate for their day depending on what they need to achieve.”
He added: “Our data suggests that working in a home environment encourages us to think more about the impact on others when making decisions.
“We are also continuing to invest in some of our office space to foster social contact, collaboration and creativity.”
Santander shrinks branch network and office space
Santander is set to close 111 branches by the end of August and consolidate its offices into six sites with its headquarters in Milton Keynes.
The bank said its branch closures were a response to the shift to online banking. In-branch transactions already fell by a third in the two years before the pandemic but with restrictions in place last year, usage dropped by 50 per cent.
At the same time, the use of online and mobile transactions has risen by a fifth each year. Now, almost two thirds of its transactions are conducted digitally.
The majority of the branches which are closing are less than three miles from another Santander branch and the bank will retain 452 sites. Account holders can use the Post Office for banking purposes.
Santander will also hold virtual tutorials demonstrating alternative banking methods.
Adam Bishop, head of branches, said: “Branch usage by customers has fallen considerably over recent years so we have made the difficult decision to consolidate our presence in areas where we have multiple branches relatively close together.
“We are also working alongside our unions to support colleagues through these changes and to find alternative roles for those impacted wherever possible.”
Office changes
Santander will close its Bootle, Newcastle, London Portman House and Manchester Deansgate offices by the end of the year.
The 5,000 staff working at the closed or consolidated offices will be given the option to work from home or work flexibly.
All its office staff will work from home until 21 June at the earliest before deciding how to work going forward.
The bank said its office occupancy had already dropped by 60 per cent before the pandemic and feedback from staff indicated a desire for more home working.
Santander said the changes would have no impact on how it served its customers.
Nathan Bostock, Santander UK CEO, said: “The pandemic has accelerated the existing trend towards greater flexible working, and our colleagues have told us this has brought significant benefits for many of them.
“At the same time, physical spaces remain very important and our sites around the UK will provide our colleagues with first-class facilities fit for the future.”
