Accord, Virgin and Clydesdale all withdraw 90% loan-to-value products
Lenders are once again pulling mortgage deals for buyers with small deposits, following a surge in business after lockdown restrictions were eased.
Accord, Virgin and Clydesdale have all temporarily taken their 90% loan-to-value (LTV) products off the market due to a rise in demand, making borrowing harder for first-time buyers.
Accord says it is has seen “unprecedented levels of business” since lockdown restrictions were eased and that it is taking longer than usual to respond to customers.
Virgin says it has temporarily withdrawn its 90% LTV products for purchase, remortgage and new build properties to protect its “service to existing customers and applications”.
Clydesdale has also temporarily withdrawn its 90% loans.
This makes HSBC the only high street bank currently offering 90% deals.
However, brokers have told Moneywise the bank has placed restrictions on the number of mortgages it makes available each day.
The bank announced in April that it would place limits on the amount of business it would take on to ensure it remained within its operational capacity.
Chris Sykes, broker at Private Finance, says: “Lenders are limiting the amount of high loan-to-value mortgages they will undertake each day, with lenders like HSBC only allowing a certain number of these products to be processed each day. They open at 8am. By 8.30am they are all gone.”
Many lenders stopped offering loans to first-time buyers after the Government introduced lockdown restrictions in March, which effectively froze the market.
People were banned from viewing properties and only allowed to move home if it was “reasonably necessary”.
Estate agents and surveyors were not allowed to visit houses, leaving buyers with no choice but to look online.
The Government relaxed restrictions on the property market last month, resulting in some lenders returning to the market, although not to previous levels.
Why are lenders pulling mortgages?
Lots of lenders have had to stop working on mortgages because of staffing issues as a result of the pandemic.
Banks and building societies have also had to shift resources because of the volume of calls from borrowers looking to take out a mortgage holiday.
The re-opening of the housing market in May has released a lot of pent up demand. This means lenders been inundated with mortgage applications and are having difficulty coping.
So in order to deal their existing workload, lenders are having to temporarily withdraw products.
David Hollingworth, associate director at L&C Mortgages, says: “Lenders may have found that the influx of customers poses a service issue so they may need to tailor that volume accordingly.
“What the market probably needs some a few more lenders to give a broader capacity range.”
He says a lot of the first-time buyer market has topped out at the 85% LTV level, with the 95% end of the LTV market virtually non-existent at the moment.
“To avoid this yo-yo effect, we need more lenders to move back into the 90% market to meet the demand that is clearly there.
“Once lenders start returning to the market, banks and building societies will be more confident that if they launch new products they will not be inundated and we will see a snowball effect."
Nationwide says monthly house price growth fell by 1.7% in May, a drop of more than £4,000. This makes it the largest monthly fall since February 2009.
Martin Stewart, director at The Money Group, says falling house prices are also having an impact on the willingness of banks and building societies to lends.
He says: “Lenders will be worried about prices coming down. They may be seeing new valuation data that is not quite as bullish as a lot of estate agents would have us belief, so they are going to proceed with caution when lending at higher LTVs.
“They might want to wait to see where the market lands before they start lending again.”
Borrowers with smaller deposits are generally seen as riskier, so banks and building societies are less willing to lend to them during an economic downturn.
If too many people take out large loans compared to their income or the value of their house this could put the banking system at risk.