Several of the UK’s largest mortgage lenders have restricted the number of products they are offering to those with larger deposits.
Nationwide has said that it will now only offer mortgages to people with deposits of 25 per cent or more, Santander and Skipton have taken similar measures.
Others, including Barclays, Halifax, Virgin Money and The Family Building Society are requiring deposits of 40 per cent.
The move has been prompted by difficulties in carrying out surveys – which can be critical in assessing riskier loans – as well as reduced staff numbers and increased enquiries from existing customers wanting to remortgage or take advantage of the industry-wide offer of a three-month payment holiday.
Robert Rosenberg, Partner in our Property, said: “This is not surprising news. We are entering a time when the housing market will be rocky. It will be rocky as those who have already exchanged desperately try to complete over the next 4 weeks – a usually stressful time, made even more stressful. Behind this group, is a queue of people almost ready to exchange. Most of them will have been told not to exchange as the risk of moving problems is too great – including significant mortgage delays and the closure of many removal firms following the Government’s lockdown measures.
On the future of the UK property market, Michael Stock, Head of the Property team, said “Whilst lenders are being prudent, it highly unlikely to have any impact on the mortgage and property market unless until there can be unconditional exchanges of contracts. For the foreseeable future, property solicitors will have to consider with their clients, whether to insert pretty unworkable and unsatisfactory contingency provisions, to cover a variation or termination of a contract, if the outbreak is still prevalent at a proposed completion date. In view of the uncertainty that these type of clauses create, the invariable legal advice is for anyone looking to borrow is to to wait, which unfortunately, will result in current mortgage offers expiring and not being renewed by lenders.”
Also, it is and will continue to be extremely difficult to obtain any mortgage offer, given the uncertainty about a borrower’s future earnings. Even in those extremely rare cases where earnings are secure, valuers currently unable to inspect a property to provide the lender with a valuation (unless a lender is prepared to accept a “ desktop “ valuation ), resulting in the mortgage and property market in limbo.
Accordingly , unless and until freedom of movement returns, with people being able to get back to work physically, this is extremely unlikely to change. However, I anticipate that, even when that happens, prudent lenders might still wish to “wait and see” (at least 3-6 months ) if there is improvement in the employment and property markets and, if there is, they may then decide to revert to 75 per cent loan to value mortgage offers.”
Crucially, the move does not affect existing mortgage offers and so should not have an impact on transactions where all parties in the chain have already secured their mortgage offer.