You may have recently heard in the news that lenders have withdrawn 90 per cent loan to value mortgage offers, which means first-time buyers will need a higher deposit than 10 per cent. Our expert advisers have more information on the market and what to do if you are affected by the situation.
First time buyers may be finding themselves struggling to get a mortgage unless they have a significant deposit, as many lenders have withdrawn mortgage products at 90 per cent of loan to value. This means that applicants will currently need more than a ten per cent deposit in order to get onto the property ladder. Lenders have pulled home loan deals due to unprecedented demand since the property market reopened for valuations and viewings in mid-May. ‘At present there are very few lenders providing a mortgage for anyone with less than a 15 per cent deposit,’ says Leslie Morris, MBA’s Senior Mortgage & Protection Adviser. ‘We are seeing lenders dipping in and out of the 90 per cent market but this is dependent on the volume of business they receive.’
High demand for mortgages
Demand for mortgages has been substantial lately, and lenders are having to manage how they cope with the number of applications they process.
‘HSBC – clearly being inundated with a growing level of demand – recently put in place steps to control their distribution,’ says Phil Leivesley, also a Senior Mortgage & Protection Adviser for MBA. ‘This essentially meant they would open for applications at 8am and once a specific amount of money had been reserved that day, they would stop accepting applications and we would have to join the queue the following day.
Other lenders have faced similarly high levels of demand. ‘In one day, Accord Mortgages received as many applications as they would normally expect over a two-week period,’ says Phil. ‘Aware that they wouldn’t have the capacity to cope with such demand, they announced they were withdrawing from the 90 per cent loan to value market. On seeing this announcement, Virgin Money and Clydesdale Bank clearly saw the prospect of a significant increase in demand and also took the decision to withdraw their 90 per cent loan to value products.’
Phil adds: ‘This currently leaves only HSBC as the only mainstream lender (at the time of writing) lending at 90 per cent loan to value.’
Another reason why lenders have withdrawn 90 per cent mortgages is that their ability to process applications was reduced during social distancing measures. Many have fewer staff in the office to manage their workloads which makes the completion of applications more challenging. Banks have also had to deal with numerous calls from existing customers enquiring about taking a three-month mortgage holiday. In general, customer demand has been significant.
At the time of writing, all lenders have withdrawn their 95 per cent mortgage products for the foreseeable future. This really hits home the point that the more funds you can raise, the more likely you are to get a mortgage.
‘We know this is having a major impact on first-time buyers,’ says MBA’s Managing Director, Monica Bradley. ‘Since the market reopened properly in mid-May, we have been very busy, and we understand that there are many people who really need to move. However, we are now at the end of the three-month furlough period and now is the time when employers are consulting with their staff about whether or not they should go back to work, so unemployment could be an issue for many people.’
If you are first-time buyer, see if you can raise a 15 per cent deposit and if not, don’t dismiss your chances of getting a mortgage later in the year. Some lenders will resume their offers and while it may be harder than before to obtain a mortgage, it’s not necessarily going to be impossible.
Know where you stand
Make sure you know where you stand with your employer and look after your money so that you are in a strong position when there are more options available to you. Being able to show that you have a secure income in the near future will make a big difference. Try to save money and manage your finances carefully.
However, it’s also important to keep an open mind about the property market and know where you stand. Timing is key and you may be able to obtain a 90 per cent mortgage if your timing is just right. Speak to an experienced mortgage broker who will have access to a wide range of mortgage products. ‘Lenders and criteria products are changing weekly at the moment, so we are on hand to keep an eye out for the client and always source a competitive deal,’ says Neil Standring, MBA’s Senior Mortgage & Protection Adviser.
MBA is here to help and offer advice if you have any questions about obtaining a mortgage.