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Mortgage lenders withdraw products for low-deposit buyers
Mortgage lenders are temporarily withdrawing products for buyers with small deposits amid coronavirus pressures.
Nationwide Building Society, one of the UK’s biggest lenders, yesterday withdrew mortgages with a loan-to-value (LTV) ratio above 75% from sale.
All fixed rate and tracker mortgages for buyers with a deposit smaller than 25% are therefore unavailable, including for new build purchases, first-time buyers and remortgages.
It comes after the government effectively froze the UK’s housing market last week by advising people to delay moving homes in order to avoid breaking social distancing guidelines.
Other large mortgage lenders have made similar moves.
Paul Broadhead, head of mortgage policy at the Building Societies Association, told Inside Housing: “Lenders and borrowers are facing unprecedented conditions. The temporary move away from higher LTV products across the whole market reflects prevailing uncertainty and the fact that physical valuations are on hold.
“Lenders are focusing on supporting their existing borrowers that have been affected by COVID-19, often with fewer staff available to work.”
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Virgin Money suspended mortgage applications for new purchases last week following the government guidance and is now only offering remortgages up to 60% LTV.
The Family Building Society has also withdrawn all products for new customers above 60% LTV.
Nationwide said that instead it will focus “on supporting existing members and processing ongoing applications while the coronavirus outbreak continues to impact the nation”.
Sara Bennison, chief marketing officer at Nationwide, said: “As the UK’s second largest mortgage lender, and as a member-owned organisation, we need to maintain the levels of service expected of us in the face of an extremely high number of enquiries about existing mortgages and ongoing applications.
“That is why we have taken this decision on a temporary basis, although by continuing to offer home loans up to 75% loan-to-value we can continue supporting the housing market.”
The move applies to Nationwide’s buy-to-let arm, The Mortgage Works, which is also temporarily withdrawing all House in Multiple Occupancy (HMO) products.
Existing Nationwide mortgage customers will still be offered mortgage deals of up to 95% LTV and products already agreed will still be progressed, with the society providing offer extensions and alternative valuation methods in light of the pandemic.
New mortgages are still available at 75% LTV and below.
Mortgages lenders have agreed to offer a three-month repayment holiday for people facing financial difficulties as a result of COVID-19.
A spokesperson for UK Finance, which represents banks and lenders, said: “The mortgage industry is focused on supporting those customers most adversely affected by Covid-19, including through measures such as a mortgage payment holiday of up to three months and the suspension of possessions.
“As such, firms are having to deploy their resources to meet this unprecedented demand, while also dealing with the impact of COVID-19 on the wellbeing of their own employees who are working tirelessly during these challenging times.”
Update: at 9.18am 02/04/20 a comment from UK Finance was added to the story.
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