Lenders are reported to have struggled to deal with a flood of applications from first-time buyers. If buyers are unable to climb on to the housing ladder, or even move up with their next purchase, this could reduce demand and exacerbate any fall in prices.

Most banks have stopped deals with a 10% deposit, the industry fears a sharp fall in house prices and now HSBC is the only high street bank offering mortgages with a loan-to-value ratio above 90%. These deals are limited in number each day, and certainly from our experience are incredibly difficult to acquire. It may be recommended that the client attempts to go direct to HSBC to try themselves.

Why are Banks increasing the deposits buyers need?

Banks are withdrawing lower deposits due to fears they will lose money on mortgages if prices plummet and repossessions do not cover the money lent. They are basically asking customers to put more ‘skin in the game’ to mitigate their exposure to loss.

What is availability of products?

Banks are now squeezing out borrowers who can stump up only a 15% deposit for a home, data shows. The number of mortgage deals available to borrowers with a 15% deposit has almost halved from 664 to 357 since March, according to analyst Moneyfacts. 

Even deals requiring a deposit of 20% have fallen from 714 to 571. The crunch comes amid fears of a house price crash, which could limit the money banks can recoup if they need to repossess homes.

TSB has become the first big lender to axe their deals on all home purchase, remortgage and shared ownership products with a loan-to-value ratio of 85%. 

What about House Prices?

Nationwide Building Society has predicted house prices could fall by 14% in 2020. Currently we have not seen a big drop in prices due to the limited supply of properties which seems to be propping up the prices at the moment.

​Two-year average mortgage rates have fallen to new lows, as choice at higher loan to values (LTV) remains limited. Rates now stand at 1.97% on a typical two-year fix, analysis by Moneyfacts. It is the lowest level in a year and compares to 2.49% in June 2019. The fall in rates is largely because the number of higher Loan to Value (LTV) products has fallen dramatically since the UK went into lockdown.
 
The higher LTV rates are usually higher, so without them the average has naturally decreased. Lenders that have been offering higher LTV mortgages in recent weeks have found they have been overwhelmed with demand. They have even limited availability to customers and brokers alike to makes sure they are not overwhelmed.
 
Hopefully more lenders will be able to re-enter the higher LTV area making more options available to borrowers. However, this will mean the average rate will begin to increase again. If you are in a position to look at your mortgage options, now would be a great time.
 
The number of additional mortgage products coming to the more market in June has flat lined. Product availability plunged by 2,656 between March and May as the UK and property market was in lockdown, according to Moneyfacts.co.uk. Between May and the beginning of June lenders started to widen choice by adding 244 deals to the market. However, this trend has not continued during the rest of June. Lenders have been particularly cautious around reintroducing higher LTV mortgages.
 
This is particularly disappointing to first time buyers who are already suffering from low savings rates and now extremely limited higher LTV mortgage products. There is huge demand for these type of mortgages, although lenders have an appetite to lend, keeping the mortgage market moving, the demand has been too much for them and caused most to take a step back to take stock of what the future may look like.
 
Many households have suffered over the last few months with reduced income, lack of job security and general upheaval. Soon we will see the first batch of mortgage holidays come to an end and potentially an injection of customers wanting to assess to current mortgage world.

One of the most obvious changes we have seen from mortgage lenders is the restrictions on applicants’ income and affordability.

Many employees rely on elements of income other than their basic salary, such as commissions and overtime. Lenders will use varying % amounts of additional income an employee receives from 100% to 0%, this can have a major impact on an applicants’ total loan available.

Since the Coronavirus outbreak we have seen lenders significantly adjust their criteria around affordability in general. The most significant challenge is proving to be when an applicant has been ‘Furloughed’, if you are furloughed by your employer, it means you're being sent home, but will still receive 80% of your salary by the Government, up to a maximum of £2,500 a month. Most major banks will still lend to workers on furlough, but many are assessing lending on a case-by-case basis. Many lenders will now only accept an employees’ furlough pay rather than their normal salary amount. Some lenders have now started asking new customers on furlough to provide letters from their employers confirming they will indeed be brought back to work.

Case by Case Basis
 
The term ‘Case-by-Case Basis’ is one that is becoming synonymous with mortgage applications. It means that the lender will review each individual application on it’s own merits. This is particularly important when an applicant has income made up from commissions and overtime as well as basic salary. Basically, lenders are looking at the industry you work in and deciding how your industry will be affected by the impacts of coronavirus.
 
An example would be a car salesman whos’ commission makes up 70% of earned income. One lender will not take the commissions earned at all, another will take 65% of the commission amount and another will not take any of the commission if the applicant has been furloughed. It is safe to say that there is no one size fits all.
 
Further pain is dealt out to those applying, as the time taken for the lenders to assess cases has increased significantly, making the applicants sweat before a decision is made.
 
This will leave a huge number of employees (who have been furloughed or not) in a state of flux. Knowing what the right thing to do is difficult to say the least, and will often require us to discuss a case with a number of lenders before we are able to recommend the best solution before going forward.     

Mortgage lenders have made significant changes to the availability of their mortgage products, some lenders are even going as far as to stop any new mortgage lending.

This is not limited to the smaller banks and building societies but has been across the entire spectrum including major high street banks.
 
Why are they doing this?

There are a couple of major reasons why lenders are doing this. Coronavirus has hit the workforce hard, with restrictions on employees affecting the Banks and Building Societies in the same way as everyone else. Basically, the levels of business a lender has the ability to deal with is reduced. Their response has been to remove products, thus reducing the incoming business. This has left lots of people without any product options.

The second major point is that physical mortgage valuations have not been possible due to the government guidelines. Some lenders do carry out desktop or drive by valuations but not all.
 
What does this mean for existing borrowers?

If you’re on a variable rate or tracker product you may not see any change in your monthly payments or interest rate as this is happening so fast the lenders are being very slow to pass the reduced interest rates down the line, this may be due to the significant impact coronavirus has had on their workforce. Some lenders however have addressed this issue by committing to passing on the full reduction to those entitled to it. Other lenders are delaying any change to those product rates, this would suggest they believe the Bank of England see the base rate reduction as a short term measure.
 
What about new mortgages borrowers?

You could be forgiven for assuming that the reduction in base rate will have an immediate impact on the rates available to mortgage borrowers, but this has not been the case so far. Most lenders have not reduced their rates at all with many withdrawing higher loan to value product ranges entirely, it looks like the risk of higher loan to value mortgages is too much for most lenders at the moment.

Some of the more niche lenders such as Together Money and Vida Home loans are simply not able to obtain money to lend themselves at the moment. They use the wholesale and capital markets which themselves are closed currently. This means these types of lenders are only able to work on existing mortgage applications and are unable to accept new ones.

Is getting a mortgage possible?

Lenders who have made changes have also made it clear that they are expecting these to be temporary due to the coronavirus situation, and are hoping to return to normality when possible.

When money is available to lend and surveyors are able to physically value a property the lenders are likely to revert back to their pre lockdown criteria and product ranges.
 
What can I do in the meantime?

The main thing to remember is that lenders want to lend money, it’s what they do. The measures they are taking at the moment are in response to the current situation. It is still possible to submit applications and more lenders are opening up higher loan to value products each week.

The main thing you can do is prepare yourself for the mortgage process, get in touch with a broker who can start researching for you, discussing your options and get an understanding of your situation. Check your credit report and make sure you're in the best position possible when the dust settles.

Valuations is the big question. Lots of lenders have been innovating in the last few weeks to try and navigate this hurdle. AVMs & Desktop Valuations have been widely introduced to try and accurately value properties for mortgage purposes.

Furlough & Mortgages

With so many employees being put on furlough mortgage lenders have been updated their criteria and factor this into their affordability calculations. The fact that lenders are still considering applications from furloughed employees is good news, however most lenders are now using the furloughed pay amount at 80% of your normal salary, even if it is being topped up by your employer.
 
Mortgage Product Availability Drops

The amount of mortgage products available in April (although still in excess of 10,000) was significantly lower than the running average before. Products are beginning to become available again but this will take time to get back to the previous ‘normal’ levels.
 
What are AVM’s?

AVMs are Automated Valuation Models, computer programs designed to value properties. They use historic sales data in order to calculate an estimate for the value of the property in question. It is as a result of AVM’s that more lenders have been able to increase the loan to values available and indeed start to lend at all.

Lot’s of lenders are now offering up to 85% loan to value with a few offering 90%, this new technology is helping the mortgage market recover sooner.
 
What does this all really mean?

There are lots of positives to take from the way lenders are reacting to the changes in the world. The way the lenders have adapted, and how quickly, to the changing world has been excellent, many completely changing their processes to boot. It will undoubtedly contribute to a smoother process going forward, leading to both faster processing and potentially increased capacity.
​
It seems likely that lenders will be looking to reintroduce higher loan to value products when they feel ready. Hopefully this will be sooner rather than later and give clients more options.

Where are we now?

Physical valuations are now possible, subject to the owner and surveyor being satisfied it is safe to do so. This means that lots of lenders have been able to get surveyors back out to properties again.

As the lockdown continues, the availability of mortgages with smaller deposits of 5% & 10% have remained very low. There are in fact less than 20 products available at 5% in total, with most lenders still offering 85% as the highest loan to value.

The biggest impact of the continuing shortage of funding is on higher-risk borrowers, including first-time buyers. They are likely to continue to find it more difficult and expensive to get mortgages while current conditions persist.
 
What has this meant for new mortgage products?
​
More products are coming back to the market and becoming available again, we are nowhere near to the levels two - three months ago but availability is on the increase.

It is worth noting that although the loan to values are becoming more available, although still incredibly limited, lots of the lenders have tightened their criteria and background income multiples. This means that you may not be able to borrow the same amount as you could in pre lockdown times.

The surveyors valuing properties for the mortgage lenders are also in a bit of a sticky situation. As they usually use comparable properties that have sold recently in order to effectively appraise a property they are at a disadvantage as there really hasn’t been any property completions. In this situation it would not be unsurprising if the surveyors are cautious when valuing for the foreseeable future.

​Despite all the doom and gloom surrounding us moment, we need to remain positive. There will be light at the end of the tunnel and life has to go on. For many businesses and industries, there is an element of the unknown, but this will pass. Some may say that starting a business in early 2020 is not ideal. However, there is one local chap who is hoping to buck the trend and started his own estate agency business. Having worked in both Cooperate ad independent environments,  Jonathan Mapp, who has over 14 years experience in the local area, has seen a real change in the industry especially  over the last few years. He has experienced both good times, and bad, but strongly believes that the estate agency industry is strong and overall the market pretty good. He feels he is able to offer a new, enthusiastic and fresh approach to estate agency and with interest rates for mortgages being so low, he believes that now is the perfect time for people to buy and sell property, even with the unknown of the coronavirus. Jonathan is hopefully able to help vendors offering low estate agency fees, No VAT! While still being able to provide the personal attributes the industry demands.  
 
Jonathan covers Hythe, Folkestone, Romney Marsh, Ashford and all surrounding areas. He works closely with solicitors, mortgage advisors, and all parties to ensure a smooth and prompt progression of sale.
 
Being independently owned, he can offer the flexibility to work with all customer requirements giving a professional, personalized service tailored for you. For Jonathan, customer service is one of the most important aspects of the property industry. He is confident that when it comes to selling your home, he has it just right.  His work ethos is to treat all clients as he would want to be treated himself, and truly prides himself on impeccable customer service. He is passionate about his work and will be with you every step of your journey, from start all the way to the handing over of keys on completion.
 
Mapps Estates ‘will go the extra mile’.
 
Mapps Estates, ‘The Route To Your Perfect Move!’
 
Call Jonathan on 01303 232637 to discuss any aspect of the moving process. He will be delighted to help.

The process of buying a property doesn’t start with selecting a home within your budget.

Often, it’s worth preparing months in advance if you need to apply for a mortgage. You’ll need to get your borrowing history in shape, for starters, so that mortgage lenders may view your ability to repay loans in a favourable light. Having a good credit score is crucial to getting a mortgage at a good rate. You may still be able to get a mortgage without good credit, but the structures and rates available to you might leave you paying more than you should. 

Because of how closely it will be scrutinized, you should definitely look at your credit score and report before a lender does. An FTC study in 2013 showed that as many as 25 percent of consumers have an error on their credit report that could affect their score. Your credit report will help you identify areas of improvement. For instance, credit card utilisation rate the ratio of your credit card debt to available credit, this can be a major impact on your score. Something as simple as increasing your credit limit could improve your score before you apply for a mortgage.

Here are some of the things that you can do to get credit-ready before applying for a mortgage: 

• Register to vote
  You need to be registered on the electoral role so lenders can confirm your address. Doing this can also help the lender to trace your credit history. If you’re not registered, it will be difficult – and possibly unlikely – that the lender will have enough information to progress your application.
• Be selective about your credit applications
  Too many rejected applications for credit can reflect badly on your mortgage application. This could suggest to the lender that you’re not creditworthy, or that you’re desperate – which could raise questions about your ability to make your mortgage repayments.
• Review your credit history and score
  Check your borrowing history in advance. This allows you to dispute any inaccuracies so that lenders will receive correct information on your ability to repay debts. Your credit score, on the other hand, will give an indication of how creditworthy lenders may find you. If your score is low, you will want to see if there are any credit habits that you need to improve on before making the mortgage application. 
• Reduce your debt-to-income ratio
  This is the proportion of debt that you have in relation to the money that you make. The higher this number is, the more debt you have. Lenders typically prefer applicants with a lower ratio, as this means that you’re likely to have the funds to make your monthly mortgage repayments.
• Cut out any unnecessary borrowing
  Try not to open new credit lines in the six months before applying for a mortgage. This could increase your debt-to-income ratio, which may reflect badly on your ability to repay any mortgage loans.
• Keep older credit accounts open
  These can demonstrate to lenders that you’ve been able to make repayments over a sustained period of time. You may want to close inactive accounts, though, as they would show lenders that you have too much access to credit that you don’t need.
• Make sure to pay bills on time
  Even if your credit history seems in order, don’t drop the ball and forget or ignore bills in the run-up to your application. Your borrowing records are ongoing, so any slip-ups before you apply for a mortgage would show the lender that you may not be able to meet your mortgage repayments.
• Remove out-of-date financial associations
  Your financial associations could affect your ability to obtain credit. For example, you may have had a joint account with former housemates for paying bills, or you might have separated from a spouse. Their current and future borrowing habits could affect your credit applications, so ensure that you’ve removed these links from your record.
• Check on joint applicants
  If you’re making a joint application for a mortgage, you should know that lenders will assess the creditworthiness of all of the people applying. It’s important check with the other person or people whom you are applying with to make sure that they also have their credit history in order.
  

Lenders use a range of factors to determine whether or not to give you a mortgage loan. There is no one simple solution for a successful application. However, the steps above could help boost your chances of obtaining a loan for purchasing property. If you want to know more about any of the information above please don’t hesitate to contact us on 0800 8620 840 or visit our website www.ptmortgagesltd.co.uk and fill out a contact form for a call back.