Private Finance's Weekly Mortgage Memo - 14th September 2020
This is our take on recent news in the mortgage market. Our views are often cited in several national publications, including; BBC News, The Times, Telegraph, City AM, FT Adviser and Daily Mail, as well as a number of key trade publications, so this should keep you ahead of the curve. If you have any questions on any of these stories, or would like further information, please do not hesitate to get in touch.
At a glance:
- Loan-to-income multiples suddenly curtailed
- 85/90% LTV products launched... but for one day only
- Expat and holiday let products re-launched
Loan-to-income multiples suddenly curtailed
Barclays, one of the largest mortgage lenders in the UK, recently suddenly changed their Loan-to-Income multiple from 5.5 x income to 4.49 income. Lenders usually give ample warning to criteria changes such as this and do not apply it to cases that are in progress, but in this instance the change was brought in with immediate effect, with no warning and applied to all cases going through the application process. It affected a number of cases we had in progress, for example, one of our brokers had a client who earns £90k and had a decision in principle to borrow up to £495k, but now his maximum loan with them would be £405k and he’s at the final stages of offering on a property – there are of course other lenders at 5 x income, but at this level a difference of £35k in borrowing can be significant in terms of the property one can afford, and could mean the difference between a flat and a house or having to rethink your search to a different area.
- Despite the positive news about the high demand and rising prices in the housing market, this major unannounced criteria change is indicative of just how volatile the lending market is.
- Lenders are taking a cautious approach and want to curtail borrowers to stop them over-exposing themselves, and this arguably illustrates that they believe a significant fall in house prices is on the horizon…
85/90% LTV products launched... but for one day only
TSB have launched a 5-year fixed rate mortgage deal aimed at first time buyers who have a deposit of 10 or 15%, however, this product was available for one day only! Many lenders have withdrawn from this space in recent weeks and lenders that do return have only opened these products up for a very short time, such as another recent 2-day release from Accord.
- The term of this product is important as it illustrates that lenders want to restrict high LTV borrowers to longer term fixes to ride out any wave of house price uncertainty.
- Aside from whether you could even access this product given its limited availability, the lending criteria is also restrictive and aimed at lower risk borrowers. The maximum LTI is 4.5 x income, maximum loan amount is £350k and the only accepted property types are houses and bungalows.
- This latter point is interesting as it suggests this lender believes flats are going to be harder hit by any potential fall in prices, may be an indication of the broader shift in what purchasers will be looking for over the coming months and years, with a move away from city centre apartments to houses in the suburbs and the country.
Expat and holiday let products re-launched
Ipswich Building Society are relaunching BTL products for expats and holiday let products, including for properties over £1m. We have found that demand for expat mortgage products has been huge of late and we have had a significant number of enquiries, with a particular increase in the number of enquiries from Hong Kong, in no small part on account of the political situation and this will likely continue, but it is the holiday let relaunch that is interesting here…
- The outlook for landlords is not great at present with a number of issues creating rental voids for some and declining rents in London in particular, however the holiday let market is booming, and with huge demand comes higher prices for stays as an increasing number of us are opting for staycations in the wake of coronavirus uncertainty surrounding international travel.
- We believe holiday let products will see significant demand in the coming weeks and months as landlords look outside of city centres for strong returns and seek to diversify their portfolios.