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    I posted a couple of days ago the news of lenders removing 90% loans for residential mortgages, the following article demonstrates the severity of

    Number of 90 per cent LTV deals almost halved overnight

    by: Owain Thomas
    • 12/06/2020 • 0

    The number of 90 per cent loan to value (LTV) mortgages available
    on the market fell by almost half in one day this week.

    According to data from Moneyfacts, 95 per cent LTV deals have also
    dropped by a quarter since the middle of lockdown, with 29 being
    available on 10 June compared to 41 on 1 May.

    However, the biggest fall has been in the 90 per cent sector.

    On 8 June there were 191 deals at this level, but a day later just 104
    remained with 87, or 45 per cent, having been withdrawn overnight.

    The total rebounded slightly to 118 on 10 June, but the figures serve
    to highlight the severity of the change in the market (see graph below).

    This drop took the availability back down to levels seen in the middle
    of the lockdown, where there were just 100 90 per cent LTV deals on 1 May.

    Since then Coventry Building Society has released a tranche of 90 per
    cent LTV lending, but these two products are only available for
    four days
    as the mutual said it wanted to manage its service levels appropriately.

    This echoes those lenders that left the market over the last week,
    citing a deluge in demand and wanting to preserve their service quality.

    Challenging situations

    Brokers have told Mortgage Solutions that they understand lenders
    are facing challenging situations with staff shortages, due to furlough, social distancing and a lack of homeworking options

    There are also pre-lockdown backlogs and lenders could also be
    concerned about the potential impacts of a substantial house price
    fall affecting loan books.

    But advisers have also urged lenders to return to the market to help
    prevent that becoming a self-fulfilling approach by restricting the
    number of borrowers available to buy properties.

    In contrast, the Moneyfacts data also showed that 85 per cent LTV
    deals have recovered significantly since the lockdown measures were
    eased in England as lenders have rebuilt their operations.

    During June they have actually increased from 318 on 8 June to 338
    on 10 June, and this in turn is 63 per cent higher than the 208 active
    on 1 May.


      Nationwide has withdrawn its direct-only high loan to value (LTV) lending in the face of house price uncertainty to protect its borrowers from falling into negative equity.

      The move means the lender has ended its dual pricing plan of lending up to 95 per cent LTV in-branch but restricting lending to 85 per cent LTV through its broker channel.

      All new lending is now being equalised to a maximum of 85 per cent LTV.

      Henry Jordan, director of mortgages at Nationwide Building Society, said: “The outlook for the mortgage market and house prices remains uncertain.

      “As a responsible lender we must factor this uncertainty into our lending assessments, which is why we have taken the decision to reduce our maximum LTV for new business.

      “Our priority at this time must be to help members keep their homes. As such, we need to ensure our members can afford their repayments, while doing what we can to protect them from falling into negative equity.

      “We will continue to keep this situation under review and hope to return to lending at higher LTVs in the near future.”

      The society will still allow lending up to 95 per cent LTV for product transfers and existing members moving home but for all new borrower house purchase, remortgages and first-time buyer lending, borrowers will need a deposit of at least 15 per cent.

      Nationwide is also reducing fixed rates at 60 per cent LTV by up to 0.1 per cent for borrowers remortgaging to the society. Two-year fixed rates will now start from 1.09 per cent with a £1,499 fee and five-year fixed rates from 1.40 per cent with a £999 fee.


        Barclays makes significant changes to BtL mortgages and Properties

        Barclays is to stop accepting new purchase and remortgage applications for multi-unit properties, special purpose vehicles (SPVs) and limited liability partnerships (LLPs).

        This will include unencumbered applications, with the last day for these submissions being 26 June.

        The lender explained the changes along with others in a notification sent to brokers.

        On the same day, Barclays is also closing further advance and transfer of equity applications through brokers on its legacy buy-to-let (BTL) platform. This will affect clients with a six-digit account number.

        Any client in this situation requiring further borrowing can still do so through direct channels.

        “Please be aware that we continue to accept intermediary applications for further advances for your clients with a Barclays BTL mortgage with a ten-digit account number,” the lender said.

        Brokers can continue to submit buy-to-let product transfers using the online tool in the lender’s hub, irrespective of whether they have a six- or ten-digit account number.


          I have made mention of the impact that Covid19 has had on lenders that are Non Deposit Taking organisations and entirely dependent on institution funding, so to put everything into context I am copying in an excellent article which appeared in a Mortgage Trade publication written by Bob Young Chief of Fleet Mortgages.

          Non-banks need financial support to help borrowers in the future – Young

          by: Bob Young, chief executive, Fleet Mortgages

          • 22/06/2020

          As lockdown eases the mortgage market is trying to make sense of this period, how the future looks, and lessons we can learn from the handling of the pandemic and its influence on lending and housing.

          One future takeaway might be how we balance government support with the provision of mortgages by specialist, non-deposit taking, lending institutions.

          It seems likely this period will result in greater numbers of borrowers requiring specialist mortgage loans; buy-to-let, self-employed, contractors and freelancers or indeed the credit-impaired.

          It does not take a genius to work out that these borrower demographics might grow as a result of the economic impact of Covid-19.

          And where will they turn for mortgages? Specialist lenders will probably fill this particular breach so there will need to be a change in thinking around government support and who can access it.

          Specialist lenders have, once again, been placed in a tricky position during the crisis because, for the most part, they have not been able to make use of the government and Bank of England money that has been freely available to deposit-taking organisations.

          Costly funds

          The capital markets have effectively been closed for the past six to eight weeks, meaning the spreads have widened, and the cost of funds have moved from 90 basis points over the London inter-bank offered rate (Libor), to a peak of 310 points over Libor.

          Obviously the cost of this money was far too much to be passed onto borrowers.

          Hence, the decision by many specialists to either cease new business entirely or to pull back considerably. It has meant less lending and tighter criteria.

          The fact is that advisers would not have been able to sell mortgages to clients at the costs we would have needed to put on our loans.

          It has meant a specialist lending sector under severe pressure, and while there are some green shoots starting to be seen, this is a long-term ‘game’.

          There has been some talk that we might see movement in the capital markets by September or October. Other commentators have suggested the market could be in limbo until the Spring of 2021.

          That has serious repercussions for a number of lenders and it could mean the difference between survival or not.

          It would be incredibly frustrating to see fewer lenders and products in the specialist space, at a time when the need for these mortgages is only likely to grow.

          Need for a solution

          Fleet has been fortunate in that we negotiated lines with our funders to keep lending during this period, albeit at a reduced level. But it would have been incredibly helpful to have access to the government support.

          This was not, however, possible.

          If there are further waves of Covid-19, or indeed future virus strains which have a severe impact on our market, then we need to find a solution here.

          Specialist lenders contribute a great deal in terms of helping borrowers who would otherwise not be helped by the mainstream players.

          We talk a lot about the depth and breadth of the UK mortgage market and the recognition that this is not supplied in its entirety by deposit-taking banks and building societies.

          That being the case, I’m sure a solution can be found to support those lenders during future turbulent times – the benefits for the market and those borrowers would be huge. We must keep working towards it.


            I fear that todays announcement by the Halifax Bank is a portent of things to come so far as residential homeowner mortgages are concerned.

            "Halifax for Intermediaries has reduced the amount of bonus, overtime and commission income it will use to support mortgage affordability while speeding up its underwriting process for self employed applicants.

            From 8 July, the bank will reduce the amount of bonus, commission and overtime income it will use in an affordability assessment from 60 per cent to 30 per cent.

            In an email to brokers, it said it had taken the decision because this type of income was likely to be less stable during the Covid-19 pandemic.

            The change to the amount of variable income used for affordability will apply only to new cases started on or after 8 July and will not impact any pipeline cases started before this date.

            For certain self-employed cases, unless an underwriter review is needed, brokers do not have to supply three months’ bank statements to support the application.

            The mortgage application system will tell brokers when the latest three months’ bank statements are required on a particular application.

            For pipeline cases that previously showed bank statements were required but no longer require an underwriter review, the bank’s system will be updated to remove the request.

            The majority of contractor cases will no longer require review by a Halifax underwriter. Income verification of contractors will be undertaken as part of standard processing.

            For contractors providing a copy of the contract as proof of income, a latest bank statement showing the salary credit or latest payslip must be provided.

            Halifax said changes were being made to the types of cases requiring review by its underwriters to ensure that only cases where further assessment around the income sustainability was needed were referred for review.


              Virgin Money gets tough on Lending Criteria

              Tomorrow, Thursday 9 July, we will update our lending policy for customers who have County Court Judgements (CCJs) or who have defaulted on an item of credit.

              We will no longer accept cases where a CCJ or defaulted account remains on a customer’s credit file, whether satisfied or unsatisfied.

              We will also no longer accept cases where there has been two or more consecutive missed payments on any item of credit in the last six months


                The volume of applications being placed with a shrinking number of lenders for high loan to Value mortgages is prompting some to increase the rates charged for this element of mortgage lending, the following article highlights the steps being taken by three lenders who indeed were not the first to charge a higher rate to reflect the perceived heightened risk.

                Nationwide, Santander and Accord raise rates on high LTV mortgages

                by: Lana Clements
                • 28/07/2020
                • 0

                A slew of high street lenders are hiking mortgage rates for borrowers with smaller deposits or equity, as appetite in this arena remains heated.

                Analysis by Mortgage Solutions yesterday found average rates in this part of the market were already starting to creep up in the last two weeks and this appears to be continuing.

                Nationwide is raising select tracker and fixed rates by up to 0.20 per cent on deals at 85 per cent loan to value (LTV) from Wednesday 29 July.

                Santander is also upping costs on select 85 and 90 per cent LTV fixed and tracker deals by up to 0.25 per cent.

                However, the lender is also shaving rates by up to 0.10 per cent on select mortgages at 80 per cent LTV, and up to 0.20 per cent on buy-to-let five-year fixes.

                At the same time, Santander is withdrawing all 10-year fixed rate deals.

                Accord raises rates and increases loan size

                Accord Mortgages is also pushing up rates on select products between 75 and 85 per cent LTV.

                The lender said it followed “significant competitor movement with the higher LTV markets”.

                However, maximum loan sizes are also being increased to £2m on new lending and additional lending between 80 per cent and 85 per cent LTV.

                Loans had previously been capped at £1m.

                The increases are available for house purchases and remortgages and come with a £995 fee, £500 cashback and free valuation.

                Nicola Alvarez, corporate account manager – propositions at Accord, said: “Borrowers have very few options when looking for larger loan products in this LTV bracket.

                “We’ve therefore increased our maximum loan size to offer brokers more choice when advising high income clients looking to purchase or re-mortgage a high value property at a higher LTV.

                “Accord remains committed to supporting the market and we hope these latest changes, alongside our common sense lending approach, will help us ensure we can offer a broad range of competitive products with the service brokers expect from us.”
                With the prospect of many applicants presently being furloughed by their employers possible not having a job after the furlough scheme comes to an end lenders understandably have serious concerns over the degree of affordability when taking into account the mortgage and in many cases high levels of unsecured credit. The next six / 9 months may prove a major challenge for prospective homebuyers as well as for those unfortunate enough to have their employment go into the buffers because of Covid19


                  Given the increased levels of concern being expressed over the mortgageability of Flats in light of the terrible Grenville disaster lenders within the Lloyds Bank Group have provided clarity in how they will deal with existing and new build flats, I would stress that their approach mirrors that of the majority of lenders and the potential difficulties which might be experienced by vendors in either selling or refinancing such units.

                  Halifax, BM & Scottish Widows have provided guidance on the process for properties where potentially combustible cladding systems, materials and/or attachments for example balconies are either known or suspected to be present. There is a requirement to obtain a statement prepared by a suitably qualified independent professional before the surveyor can provide a valuation. A new industry-wide form has been introduced to provide a consistent approach. The External Wall System form, referred to as an EWS1 form, must be sent to them for any building with potentially combustible cladding. The form is primarily intended for buildings over 6 storeys (>18 metres) in height but could be requested for any building below this height where the surveyor has specific concerns. In England, Wales and Northern Ireland the form is in respect of a particular building so once received they do not need another form for another customer for the same building. In Scotland they require an EWS1 for individual flats. An EWS1 form is valid for 5 years. It’s the responsibility of the building owner and/or its agent as the responsible person to confirm the subject property meets the requirements of the current guidance from the Ministry of Housing, Communities and Local Government (MHCLG) and that the external wall system has been assessed by a suitably qualified independent professional advisor who will provide the building owner with the completed EWS1 form. The individual must be a member of one of the professional bodies as listed by the RICS - List of relevant professional bodies. In Scotland individual clients will have to source their own EWS1. For purchase cases a special condition will be added to a mortgage offer to instruct the conveyancer to advise the customer that the offer has been made on the reliance of an EWS1. It will also ensure that the customer knows that neither the lender nor surveying providers are liable for the information that was contained in the EWS1 form.

                  For New Build high rise blocks over 6 storeys (>18m) in height an EWS1 form is not automatically required as 2018 building regulations require that any cladding cannot be combustible and the lender will add a special condition to the mortgage offer which will advise that the conveyancer must obtain confirmation that the building complies with 2018 building regulations or alternatively they can obtain an EWS1 form. It will also prompt the same communication to the customer around the EWS1 form if applicable. It could also be requested for any building below this height where the surveyor has specific concerns. A ‘final inspection’ indicator will show as required on the mortgage offer, to ensure the mortgage cannot complete until the conveyancer confirms either building regulations or an EWS1 form has been received. Once our surveying providers have confirmed they are satisfied with the cladding confirmation then the final inspection will be marked as completed. The use of the EWS1 form is an industry-wide agreed process to ensure a fire safety assessment has been conducted by a suitably qualified and competent professional and delivers assurance for lenders, surveyors, and customers.”


                    Gatehouse Bank have announced their withdrawal from accepting mortgage applications on New Build Flats citing an increased volume of application for both Homeownership but also BtL investors. I suspect that they like other lenders are taking cover for the present until certification of Fire Safety compliance is resolved with reference to cladding concerns.
                    If this gathers momentum the implications for sales and refinance deals must be viewed with concern.


                      Metro Bank have made the following announcement, whilst stated as being of a temporary nature it continues to reflect the concerns of lenders in general how to maintain being active in the market but heightening their concerns which are becoming more apparent in the economy at large but given that staff are working remotely trying to offer a level of service which at times is causing brokers considerable inconvenience in the delays of getting speedy responses to applications under consideration.

                      ”Metro Bank is temporarily withdrawing all residential mortgage products at 60 per cent, 85 per cent and 90 per cent loan to value (LTV) at 5:30pm this evening.

                      The lender announced the change in a communication to brokers today.

                      Lenders across the market have been under significant pressure as a vibrant market additionally fuelled by the stamp duty cut and coupled with workplace coronavirus-related restrictions is limiting capacity.

                      As a result, many are being forced to withdraw products at short notice or make significant rate increases.

                      Metro Bank director of mortgage distribution Charles Morley (pictured) told Mortgage Solutions: “These temporary changes will ensure that we keep delivering the high standard of service that we pride ourselves on providing, both for our customers and brokers.”


                        There are fundamental changes amongst lenders relating to rates and loan to values for both residential and Buy to Let.

                        HSBC have temporarily placed a limit for Loan to Value on residential loans at a maximum of 85% with loans above to 90% being restricted to Product Switches.

                        Barclays have announced that the maximum loan for Buy to Let applications is being reduced from 75% to 70%.

                        Fixed Rates are starting to creep upwards across both sectors of business, details of anything of significance will be reported on shortly.

                        Given the volume of business being received and the need to have a physical valuation carried out rather than a Desk Top valuation , this is resulting in lengthy delays in getting appointments and even after it has been done there are further delays in getting the report back to the lender. I make this point as it is essential that if you are using a broker you understand the need to know the time lines associated with individual transactions.


                          Barclays changes criteria on Loan to Income and apply it retrospectively for applications received but have not been offered

                          Apologies for the length of this post but this is a warning that what Barclays has announced may be followed by other lenders and nothing is guaranteed until a mortgage Offer has been issued.

                          ” Barclays has cut its loan to income (LTI) for all residential cases that have not yet gone to offer to a maximum of 4.49 times income.

                          For borrowers with a loan to value (LTV) above 90 per cent and joint income of £50,000 or less, the new LTI will be tighter at four times income.

                          This limit will also apply to applications where there is a debt to income ratio of 20 per cent or more.

                          In a message sent to brokers, the lender said the LTI cut would also affect those offered cases where a material change has occurred that was reported after 28 August.

                          Barclays listed seven examples which it considered to be a material change in circumstances:
                          • An increase to the mortgage term;
                          • An increased loan amount;
                          • A change that results in increased outgoings/expenditure, for example adding a commitment or financial dependant;
                          • A reduction to the stated income;
                          • An increase to LTV;
                          • A change of repayment type;
                          • A change of borrower.

                          A Barclays spokesperson said: “We regularly review our lending policies and today have made some changes to loan-to-income multiples.”

                          In the note to advisers the lender said: “These changes also apply to any application that has been created and not submitted and to those that have been submitted but are yet to receive an offer.

                          “Please be advised if you do have a case that has not yet gone to offer, we will assess under the new policy and you will be notified of the outcome in the usual way.”

                          Prior to the change Barclays’ maximum LTI was 5.5 times income. The lender has also used the opportunity to simplify the number of LTI categories across its proposition.

                          Earlier this week the lender removed its daily cap on the volume of cases which it could accept, but added that there would be further changes coming.”


                            Lending Assessments are taking longer

                            The recent spike in mortgage applications is causing serious delays in the assessment of applications, the latest to report issues is the Nationwide, they have stated that it is taking upto 19 days before an application can be assessed by an Underwriter. Brokers should communicate such issues with clients in Oder to manage expectations, Agents in turn need to keep vendors onside by making them aware of the challenges been faced by lenders and it isn’t the fault of the prospective purchaser.


                              I fear the concerns over the immediate future on house prices might become a reality once the government furlough scheme comes to an end and the economic reality begins to manifest itself with the potential increase of unemployment. Yesterday Bloomberg made a similar prediction citing the growing number of lenders adjusting their criteria to reflect the increased perceived risks attached to the property market; already Savilles and James Lang Wootton had published research showing their estimates of the U.K. property market shrinking between 8% & 11% so the following article makes worrying reading across the U.K.

                              "Pent-up demand from the period of lockdown will eventually work its way out of the system in the coming weeks."

                              The Centre for Economics and Business Research has forecast a 14% drop in house prices by the end of 2021.

                              Despite average prices reaching record highs in August, CEBR's analysis suggests that prices will start to fall significantly towards the end of the year and the first half of 2021, aside from a short spike as the stamp duty reduction comes to an end.

                              CEBR predicts that average house prices will be 13.8% lower in 2021 than in 2020.

                              CEBR says the housing market "defied gravity" in August, citing July's stamp duty cut as a main factor, which it predicts will spark a 1.2% increase in average prices and a 6.0% rise in the number of transactions "compared with what otherwise might have happened".

                              The Centre believes that the temporary nature of the tax reduction means that the policy’s short term effects could be even more dramatic, as people rush to complete transactions before the return to the previous stamp duty regime at the end of March 2021.

                              It also believes that pent-up demand during lockdown has sustained house prices. An estimated 150,000 house purchases that would otherwise have taken place were put on hold between March and June as a result of the coronavirus pandemic. Data from RICS suggests that buyers have returned to the market more quickly than sellers, boosting prices. Additionally, CEBR says the impact of the lockdown on low-income workers means that recent house price data is likely to have been skewed towards higher value properties.

                              CEBR also believes that the suspension of forced sales and repossessions will have had some supply side impacts on the overall housing market throughout the second and third quarters, boosting prices as well.

                              CEBR concluded: "What most of these factors have in common is that they are transitory in nature. Indeed, the Coronavirus Job Retention Scheme was cut after August and it, as well as the ban on mortgage possessions, is scheduled to end on 31st October, while stamp duty will revert to its original level in April 2021. Moreover, pent-up demand from the period of lockdown will eventually work its way out of the system in the coming weeks


                                I have made reference to the following in recent postings but I feel inclined to make all readers fully aware of the obligations placed upon mortgage brokers to provide details of the lowest mortgage rates currently available and to give specific advice to clients if a headline rate is not being recommended. This policy change by the Financial Conduct Authority came into effect on 1st August in order that qualified advice was given to clients rather that having regard to what the Previously favoured lender might be able to do and the benefits which might accrue from making such recommendations.
                                Brokers must now pay regard to other aspects of product offerings e.g What is the Reversionary Rate after the incentive expires, Does the lender have a current and historic record of offering a Loyalty product in place of the automatic reversionary rate. Can the borrower make capital payments upto a fixed percentage each year of the incentive facility and finally what is of crucial importance is what is the true cost of borrowing when taking all associated costs into consideration for the specific period of the mortgage product; so your broker is required to show you the research and his recommendations if he is veering away from the Lowest Overall cheapest product, there may indeed be legitimate reasons but he has to explain his rationale by figures and support it within the Letter of Recommendation.


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