We highlight some changes in the mortgage industry that we have seen over the last few weeks. By no means is this an extensive list of everything that has happened with all the lenders, but rather a few things that stand out to us.
Virgin Money have made changes to mortgage documentation for Self Employed Customers. From Friday 7th August they are introducing a Self-Employed Supplementary Form as an additional document required for applications from self-employed customers. This is to help them understand what impact the COVID-19 restrictions have had on their business. It will also help them to understand any changes the applicant has made to their business model. They will only consider applications from customers where their business has been actively trading for the last three years and the customer can still demonstrate current trading levels. Any business that has been impacted by Covid-19 will undergo a tailored assessment that would be down to the underwriter’s discretion. Where the business was not impacted by Covid-19, it’ll be subject to Virgin Money’s usual assessment.
Similarly, NatWest has made changes to its self-employed submission process today and is now asking brokers to contact their business development manager (BDM) before submitting a case.
The bank now wants brokers to discuss the application before hand so it is able to go through minimal complications and ensure it fully understands the circumstances of each client.
NatWest Intermediary Solutions said: “We are working hard to make sure we understand our customers circumstances given the impacts of Covid-19.
“In this context we are putting in place some additional support for brokers to help us underwrite self-employed customers.”
This update signals a further tightening of NatWest’s processes, as yesterday it announced it would not accept remortgage applications from borrowers who were on a mortgage payment holiday.
Nationwide for Intermediaries have emailed brokers acknowledging the frustration in the event of a 90% LTV application being denied due to their rules surrounding gifted deposits. The lender reiterated that brokers should familiarise themselves with their new criteria that applies to all first time buyer lending over 85%. The new rules state that gifted funds can only provide up to 25% of a deposit amount with the applicant having to find the remaining 75% of the deposit themselves. A 90% first time buyer application exceeding 25 years will not be able to proceed. Given that Nationwide’s current turnaround time is a 10 working day wait until assessment, this has wasted time for many high loan-to-value applications and also for Nationwide due to the simple facts of not checking criteria properly.
Halifax from 5th August have temporarily withdrawn all two-year fixes within its home mover and first-time buyer ranges at 80-85 per cent LTV. Ian Wilson, head of Halifax Intermediaries and Scottish Widows Bank, said: “We are committed to supporting the mortgage market, these changes will allow us to respond to customer demand and make sure we continue to offer the best possible service levels.”
Platform has temporarily withdrawn two of its mortgage products. The five-year fixed fee-free product at 90 per cent loan to value (LTV) has been pulled, as well as the help to buy two-year fixed with fee-free and £999 fee options at 60-75 per cent LTV. This has brought Platform’s maximum lending back down to 85 per cent LTV from the end of July.
HSBC completed £9bn of lending in the first half of 2020. This equals their 2019 performance despite being hampered by the coronavirus pandemic. HSBC has been one of the few to continue offering mortgages at high 90 per cent loan to value since the introduction of social distancing measures.
In contrast, Metro Bank is looking to move into the specialist mortgage lending market due to the squeeze on its income and falling rate margins as a result of the Bank of England Base Rate cuts. Chief executive officer Daniel Frumkin stressed that the first half of 2020 had been an incredibly tough six months within a difficult operating environment.
From 7th August, Santander is increasing interest rates at 60 per cent and 85 per cent loan to values (LTVs). The lender is the latest to lift its interest rates at high LTVs as lenders attempt to manage service levels with capacity constraints and a very busy market.
TSB announced that they’ll only lend on Buy-to-let properties that have an efficiency rating of E or above.
Mortgage Solutions reported that lenders have taken different approaches to how to treat the income of furloughed workers for the purposes of affordability tests. This has been reflected by broker searches: ‘Covid-19: Furloughed Workers’ has been the second most searched-for term in the residential market over the course of Q2. With physical valuations prevented by the restrictions, some lenders embraced alternative valuation methods such as desktop valuations and automated valuation models (AVMs) – albeit generally only for lower LTV deals. This also showed up strongly in brokers’ searches.
As a result of the Stamp duty cuts we have also been experiencing more Let-to-buy enquiries and we’re not the only brokerage to be feeling that.
Private Finance’s Sykes added: “We have fair number of potential investors, but more are preparing themselves for if and when they can snap up a deal.
“Whether this be releasing equity from a current buy-to-let or residential property to use moving forward in investments, or just seeing how things work on the buy-to-let side of things in general.”
The Stamp duty cuts have also encouraged people to not just think about buying, but to rethink about what really matters now in contrast to their current residence.
Echoing suggestions made by surveyors earlier this year, Murphy said the increase in activity caused by the tax holiday had been compounded with the desire to escape inner city life.
He said: “The other big motivator is people’s perception of how work and life may be different going forward; outside space is many prospective buyers’ number one requirement, and suddenly commuting to a regular place of work is much less important. So we’ve seen many homeowners looking to move further out from London, to get more space and value for money. Who knows what the future holds, but for now these two motivations are fuelling a busy market.”
It is important to bear in mind that the mortgage market is constantly changing on a daily
basis. What might stand true yesterday may not hold today. It is advised that you contact a
mortgage broker to ascertain the most up-to-date lending criteria and product rates
available to you.
Knowledge Bank: Intermediary lender comparison site.