Turbulent times for lenders

COVID-19's impact has turned society, and many people's lives upside down. Neither the mortgage industry nor the housing market escaped unscathed from these turbulent times. The pandemic caught lenders by surprise, and some scrabbled to react, offering 90% loan to value deals one week and pulling them the next. For example, in June Virgin Money and Clydesdale Bank were among those to withdraw 90 per cent loan to value products, however, both lenders are now considering applications from people with 10% deposits.

Since the government unlocked the property market from lockdown in May, buyers and sellers have been keen to press ahead with their plans. It is a crucial time for everyone, but some borrowers are going to find it challenging to secure a mortgage. For the time being, at least, low deposit mortgages, which are vital for first-time buyers, are firmly on the back burner. The default market position is that mortgages with 15% or 20% deposits, although some lenders have started to reintroduce 90% deals, such as Virgin and Clydesdale.

There is so much uncertainty that banks and building societies are updating their mortgage lending criteria daily. There have been reports of potential borrowers submitting applications according to their lender's criteria at the time, but having them rejected because new risk factors were added hours later. The situation is very fluid.

An illustration of this comes from a survey of 1,300 UK adults who are in the process of buying a property. Approximately 50% have been denied a mortgage this year despite being offered one in principle.  

Lenders are also conducting extra checks before granting mortgage offers. If you're employed, lenders will look at whether you've been furloughed or whether you work in an industry that's been profoundly impacted. If you're self-employed, you will not only have to show two to three years' worth of accounts but also be able to demonstrate that your business is viable.

Navigating Lending Hurdles

Currently, there is an unprecedented number of obstacles in the way of securing a mortgage. Fortunately, borrowers can rely on the help of experienced mortgage management advisors to navigate the choppy lending market.

July 2020