Private Finance's Weekly Mortgage Memo - 5th October 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:
- Significantly reduced borrowing levels for some of the self-employed
- Clydesdale major product withdrawal above 80% LTV
- Demand for flats on the rise again
Significantly reduced borrowing levels for some of the self-employed
There are mainstream lenders significantly changing borrowing availability for those who are self-employed compared to those who are employed currently. For instance, one of our brokers recently had two effectively identical cases, both dual applicants with a combined income of £100k, the only difference being the employment status – Natwest could offer 5 x income for the couple who were both employed, borrowing of £500k, and 4.25 x income for the couple who were self-employed, borrowing of £425k and this is even with the clients proving that their income stream was secure.
- OUR TAKE: It has been a rough few months for the economy and we are not out of the woods yet, lenders are remaining cautious and some are becoming increasingly restrictive. This does not apply to all lenders, so there are still plenty of options for the self employed, however it is worrying if other lenders were to follow suit, penalising the self employed, even if they haven’t been affected by COVID.
- OUR TAKE: Ostensibly there is no great difference between those who are employed and those who are self-employed with the volatility of the current economy and one could just as easily lose their job, as have their income stream could dry up, however, SMEs are bearing the brunt of this crisis and do not necessarily have the capital reserves to weather any storms.
- OUR TAKE: This reduction is a blow for younger borrowers, who not only are facing restrictions on LTV, but who are more likely to be freelance and to work in the creative industries for instance. We expect this will drive buyers to look further afield in their hunt for an affordable property.
Clydesdale major product withdrawal above 80% LTV
Clydesdale, a major lender used by intermediaries, has undertaken a large product withdrawal recently, withdrawing all products above 80% LTV for everyone but existing clients.
- OUR TAKE: We predicted that 80% lending would become the key battleground and it appears very much that this is the case and we are even seeing lenders retain their best rates for even lower LTVs, 75% and below.
- OUR TAKE: Whilst demand has been strong, it is slowing and lenders would not be undertaken product withdrawals of this nature if they did not think the fall in house prices was going to be significant and imminent…
Demand for flats on the rise again
In the last week we have an increase in the number of enquiries from those looking to purchase flats, both as an investment and as a main residence. This is an interesting development as prior to this we had seen a huge demand for houses and those outside of city centres and a decreasing demand for BTL property
- OUR TAKE: The weather has definitely changed and this means that the need for outside space, which felt very urgent during the spring and summer and under lockdown is going to be less of concern to buyers over the coming months.
- OUR TAKE: The boom in the housing market in recent months may have given confidence to BTL investors who will look to take advantage of the SLDT holiday to either enter the market or increase the size of their portfolios.
- OUR TAKE: Lots of lenders offering higher LTV mortgages to first time buyers removed flats from there offering in product criteria, but if demand in this area picks up, it will allay their fears that prices are going to crash and thus they may reinstate these offerings. However, with home working here to stay we still expect demand to continue to grow in areas outside of city centres where flats are less common; in rural areas, satellite towns and the further flung suburbs.