Government urges all parties to negotiate delays as lenders rapidly pull all but the lowest risk mortgage deals.
The ongoing Coronavirus situation has impacted all of our lives in a host of different ways, from forcing many of us to work from home to the increasing reliance on supermarket food deliveries.
Perhaps unsurprisingly, the housing market is also set for a huge hit.
After all, if you’re told to stay at home, you aren’t exactly going to be looking around new properties you might want to buy once the world returns to something like normality.
'Only move if you have to'
Indeed, the Government has now slammed the brakes on the housing market, calling on buyers and sellers to postpone moves indefinitely unless the property being moved into is vacant.
In a new missive from the Ministry of Housing, Communities and Local Government, buyers and sellers are urged to “do all they can to amicably agree alternative dates to move, for a time when it is likely that stay-at-home measures against Coronavirus will no longer be in place”.
If moving is unavoidable for contractual reasons, and the buyers and sellers are unable to agree to a delay, then the department urged those involved to follow the official advice on staying away from others in order to reduce the chances of the virus spreading.
Lenders pulling deals
Of course, just because moving home is being put on ice, it doesn’t necessarily mean that the need or demand for new mortgages has disappeared entirely.
Yet there has been a dramatic stripping back of the numbers of mortgages available.
A host of lenders have implemented new limits on the size of mortgages available, though this may only apply to loans arranged through mortgage brokers rather than if you are applying directly.
Halifax, BM Solutions and Scottish Widows ‒ all part of the Lloyds Banking Group ‒ have removed all residential mortgage deals available at above 60% LTV through brokers, whether that’s for purchase or remortgage.
It explained that the situation had had a big impact on its processing resources, and that it wanted to focus on helping existing customers, for example through payment holidays.
Barclays meanwhile has pulled all of its deals above 60% LTV, in what it says is only a temporary measure, while TSB has withdrawn a host of buy-to-let deals, as well as all three-year fixed, two-year fixed-rate and five-year fixed rate remortgages deals at up to 75% LTV.
The lender has removed all buy to let fee products including trackers, leaving it with 16 BTL products for purchase and remortgage up to a maximum 75% LTV.
On the residential side it has withdrawn all three-year fixed products, and also two- and five-year remortgage deals at up to 75% LTV with a £1,495 fee.
Nationwide, the largest building society, has 'temporarily withdrawn' all mortgage products with an LTV above 75%.
Elsewhere, Nottingham Building Society is restricting its lending to a maximum of 80% LTV, while Leeds Building Society has pulled a significant number of deals and Family Building Society has restricted its lending to a maximum of 60% LTV.
According to financial information site Moneyfacts, almost 800 deals have been pulled in the last few weeks, a frankly astonishing change, though it’s worth highlighting that this still meant more than 4,400 deals were available at the time.
Extending deals
Meanwhile, UK Finance ‒ the trade body which represents most mortgage lenders ‒ has announced that lenders will offer three-month extensions to borrowers who have exchanged contracts, but not yet completed their moves.
Without this, these homemovers face the prospect of having to find a new loan once things start moving again, which will be easier said than done if so many lenders are now wary about offering deals to anyone who doesn’t have an enormous deposit, let alone if the borrower’s financial circumstances have changed.
The flight to quality
Andrew Montlake, managing director at broker Coreco, described this as a “flight to quality” with lenders unsurprisingly wary about risk.
There’s a practical element here ‒ most lenders can’t conduct physical valuations at the moment, so are relying on automatic valuation models (AVMs) instead, essentially computer algorithms that give an idea of what a property is likely to be worth.
And much as these models have become more reliable in recent years, there is obviously a limit to which lenders feel able to trust them entirely, and evidently it is at that 60% LTV point.
But there will be a decent number of people on fixed-rate mortgages that are about to mature, pushing them onto the far more expensive standard variable rates lenders charge.
Ordinarily, they could move to a new, cheaper deal but plenty of them will be now stuck in limbo, potentially stuck on that SVR, paying more than they need to, at a time when their incomes are likely under even more pressure than usual.
Their options are likely to be limited to either requesting a mortgage holiday ‒ and therefore ensuring that their mortgage will overall take longer to pay off, costing more in the process ‒ or enlist the services of a broker to try to find them a lender whose doors are still open.