​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.