A lot has happened and changed over the course of the past 2 months, and we have never been more busy here at Mortgage Advance. We are simultaneously learning to adapt to new challenges in these unprecedented times with mortgage lenders and the industry as a whole. It is incredibly fast paced due to the uncertainty floating around, particularly with fears of a second lockdown, and therefore what might have been the case today does not guarantee it'll be the same tomorrow.
According to Right Move, the UK property market is experiencing 40% more transactions currently proceeding compared to the same period last year. This has had a huge chain effect on cases being underwritten with lenders, delays with conveyancers and an increase in transactions not being able to complete in time, or very tightly so.
As of Wednesday 23rd September Nottingham Building Society have withdrawn all of their mortgage products and have temporarily suspended new lending, to focus on servicing current cases and bring back their normal service levels. They are now taking 30 working days for the first assessment to occur when only a few weeks ago it was supposed to be 10 working days for the first assessment of applications submitted. Similar monthly service levels are being experienced elsewhere including Nationwide and Platform Homeloans.
High LTV 90% products are still severely limited and restricted. Lenders have reached capacity, hence why you would probably have read on the news elsewhere of lenders releasing these particular products for 24 hours only. Although a lot of lenders still do not have the same appetite to lend pre-Covid, others such as Accord mortgages actually state the reason for not being able to consistently put out certain products is due to the inability of them to handle the capacity. Jeremy Duncombe of Accord Mortgages state that they’re in a “very strong position, capital, liquidity wise and from a risk perspective.” Accord were one of the lenders participating in 90% lending for just two days. TSB release 90% LTV products for one day only.
Given that so very few lenders are offering 90% LTV products, it then means that whenever they do release those deals, they experience a massive influx of applications. Duncombe acknowledged the lack of competition puts pressure on the lenders that do come in at this level. He said: “There are a lack of lenders lending in that space. To be able to satisfy demand – we can’t do it with a very small supply of lenders in such a significant sector… Unless more lenders move into this sector, we will continue to see an undersupply – and lenders having to come in and out of the market to manage capacity and service levels.”
High loan-to-value products involve a lot more stringent underwriting that requires more due diligence and resources. Those at a much lower loan-to-value often tend to process much faster because they more often can qualify for automated desktop valuations for example. With many underwriters working from home and not in the office, lenders have had to adapt with their new way of working which has exacerbated the inability to process a huge influx of applications fueled by Rishi Sunak’s stamp duty holiday.
Metro Bank have introduced 90% LTV rates for first time buyers starting from 3.99%, however they have become a more specialist bank in recent times and there are a few caveats that must be met to qualify for their 90% LTV prates. They won’t accept anybody who had been furloughed in the past or had an associated Covid-19 related deductions from their income, even if they are back to work earning their pre-covid pay and the maximum property value is £600,000. They also warned that this particular product may be re-priced or withdrawn at short notice.
On a more positive note for landlords, more specialist buy-to-let lenders including Kent Reliance, Landbay and Precise Mortgages have recently cut their buy-to-let rates.
Landbay has introduced a new five-year fixed rate at 70 per cent loan-to-value which is priced at 3.59 per cent.
At 60 per cent LTV, its two-year fixed rate has reduced from 3.09 to 2.95 per cent.
At 70 per cent LTV, its two-year fixed rate has come down from 3.19 to 3.09 per cent. At 75 per cent LTV, its five-year fixed rate has been cut from 3.74 per cent
Vida Homeloans has launched ‘Vida Flex’, a mortgage product aimed at both professional and first-time landlords. The product allows borrowers to fix for five years with the option to leave after three years at no cost, whether that be to refinance or sell their property. It is available at up to 75 per cent LTV and rates start at 3.84 per cent. Godiva Mortgages already has a similar product called their Flexx fixed rates whereby throughout the full 2 or 5 year fixed rates there are no early redemption penalties which is available on both a residential and buy-to-let basis.
According to Moneyfacts, product availability for both residential and buy-to-let in the mortgage industry have reduced quite significantly. In the month of August, residential products had reduced by 202 products available, which was the largest drop seen since May.
Both two and fixed year average fixed rates ave increased by 0.09% since August to stand at 2.08% and 2.34% respectively.
We must stress and emphasise to all our clients for both purchases and remortgages to be extra mindful of possible long delays from Application to Completion of a mortgage. At any point in time lenders service levels can change unpredictably and drastically, as we have seen. Underwriting turnaround times are no longer at the speed experienced before Covid-19 and lenders have had to adapt with the majority of their staff working from home and having to change their processes as a result. We have also witnessed that in some areas it can still take a few weeks to book in a valuation. Every solicitor functions differently and has their own way of processing things, and it’s also very important to include time for the legal side of things as things like searches and queries can also take time.
Sources:
Broker subscription to Knowledge Bank Criteria Updates and Moneyfacts Magazine