The number of mortgage deals and low cost loans available have plummeted since the coronavirus outbreak began
Borrowers are finding it harder to get a mortgage as lenders withdraw offers and hike rates in response to the coronavirus outbreak.
In the past two weeks banks and building societies have withdrawn more than 1,500 mortgages.
Britain’s biggest lenders have been pulling loans available to borrowers with small deposits, with some providers now offering deals at a maximum of 60% loan-to-value (LTV).
This has had a huge impact on the first-time buyer market where buyers would typically take out loans with a 90% or 95% LTV.
Which lenders are pulling out of the market?
Nationwide is temporarily withdrawing mortgages above 75% LTV, saying it needs to concentrate on existing applications. This means borrowers will need at least a 25% deposit or equity in the property in order to get a loan.
Up until now, Nationwide has been offering mortgages to customers with deposits as low as 5%.
Barclays and Halifax for Intermediaries have both stopped selling mortgages above 60% LTV.
Virgin and Skipton Building Society have also suspended all new mortgage applications for house purchases, while West Bromwich Building Society has withdrawn all remortgage deals.
Why are lenders withdrawing loans?
Property experts are predicting house prices could fall in the next six months. This would leave borrowers in negative equity, where the value of their home is less than the value of the mortgage they are paying off.
In response, some lenders are pulling higher-LTV products because borrowers with smaller deposits are generally seen as being riskier.
Banks and building societies have been flooded with calls from borrowers who are struggling to make payments. With call centre staff also having to isolate, lenders are facing growing pressure and are having to divert resources to cope with these customers.
Lenders have also withdrawn over a third of trackers since the Bank of England cut the base rate to a record low of 0.10% earlier this month.
With most lenders pulling high LTV loans, this has effectively paused the chances of most first-time buyers - who usually have smaller deposits - getting on the property ladder.
The Government has warned Britons not to move house in order to try and reduce the impact of the coronavirus outbreak.
Restrictions on movement with the introduction of the lockdown have also hit first-time buyers, as properties cannot be valued by surveyors.
Eleanor Williams, finance expert at Moneyfacts, says she hopes the withdrawal of so many higher LTV products and is only a temporary measure.
She says: “With so much uncertainty at the moment, providers seem to initially be focusing on the support that their existing customers may need in the coming weeks.”
What if you have exchanged contracts?
The Government is advising people not to move until the current social distancing measures have eased.
If you have exchanged contracts your lender can give you a three-month extension on your mortgage deal, allowing you to move at a later date.
This could mean extending the date of a current deal or pushing back the start date of a new one.
Can you still remortgage?
The good news is you can still remortgage, although brokers are advising borrowers to hold off until lenders are dealing with less strain and are able to deal with your call.
While the number of deals has fallen by nearly a quarter, there are still plenty of cheap deals available.
According to figures from Moneyfacts, the average two-year fixed rate mortgage is 2.37%, compared to 2.41% on 19 March.
Meanwhile, the average five-year deal is 2.68%, compared to 2.71% on 19 March.