Tthese are difficult times for anyone who wants to buy a house. Despite the government’s attempt to reinvigorate the market with a temporary stamp duty on properties costing up to £ 500,000 in England and Northern Ireland, unless you have a large deposit you could face a fight.
During the crisis, lenders pulled out mortgages, while those for borrowers with small deposits are disappearing faster. Some of the major banks and construction companies have started returning to the market – last week they saw 90% of the business launched by the Coventry construction company and Metro Bank and, from Monday, the national construction company will also offer them.
But the choice is still limited and lenders are asking many more questions than before the blockade.
What’s on offer
Since the blockade, the number of mortgages on the market has plummeted by almost half. Most of the deals concluded are those where buyers need a 5% or 10% deposit. According to financial data company Moneyfacts, there were 779 products for borrowers in March with a 10% deposit, while the figure is now closer to 70.
For those with 5% deposits, the options are even tighter: in March there were 391, now only 14, and many of these are specialized products, says Moneyfacts’ Eleanor Williams.
“This includes mortgages and family carers, such as Barclays’ Springboard mortgage, and those open only to applications from selected professions or those in specific loan areas, such as those offered by the Furness Building Society which reflect its principles such as mortgage to continue supporting those in their local area, “he says.
Things are compounded by low interest rates, he says, which means that anyone who saves is not seeing their money grow.
The stamp duty holiday will give extra money to removals and first-time buyers who spend more than £ 300,000. But for many, it won’t compensate for the 95% loss of mortgages, says Simon Gammon, managing director of the mortgage broker Knight Frank Finance. “Cutting the stamp duty won’t do it, so if anything, it’s more frustrating for first-time buyers,” he says.
Flashes and misses you
With little 90% choice, borrowers had to be on the ball to get their hands on the few mortgages available.
The Coventry construction company returned to the mortgage market at 90% early last week, but not for long – requested business applications between 8:00 am on Tuesday and 8:00 pm on Wednesday, stating that the flash sales had to ensure good customer service.
Other lenders are taking a different approach to mortgage rationing. HSBC offers home loans at 90% during the crisis, but has limited the number of applications it accepts every day since April. “A small number of lenders cannot undertake all activities with higher value loans and therefore this action has been necessary,” says the bank. “Obviously we will continue to regularly review the situation and hope that it will not be too long before the market returns to normal.”
The national construction company will return to the high-value mortgage market from July 20, with a 90% mortgage for novice buyers. His return should change the rules of the game. He promised not to limit the number of mortgages available every day and, being the largest construction company in the country, it should have more ability to cope than small lenders. Metro Bank has also put its home loans 90% on a more general release and is not limiting them to new borrowers.
Anyone who wants a loan with a high loan value should expect many questions. Most lenders have added new terms and conditions to their offers, increasing the number of obstacles that potential borrowers have to overcome.
“You will need to be a good quality borrower to access a 90% mortgage,” says David Hollingworth of the London & Country mortgage brokers. So anyone looking for a remortgage or a move can be asked if they have taken a payment vacation. “If you say” yes “, you can expect a more forensic examination of why,” says Gammon. “The same would apply if you were fired.” He says he hasn’t seen lenders say ahead of time that they won’t hire borrowers who took a payment break, but after checking, some were unable to borrow what they hoped for.
The Coventry construction company is clear about theft: it is willing to offer loans of up to 65% of the value of a property to anyone who is currently paid through the scheme. Metro Bank has also excluded licensed applicants for this business – and when you return from this course you must have proof of full three-month salary to apply.
Borrowers can also face additional questions on how they raised money for their deposit. Although help from other people is still allowed, nationally, buyers will only be able to take out a 90% mortgage if they have contributed to the down payment.
Lenders also ask for more from independent borrowers. “In February, lenders would have asked for bank statements for three years and based on loans,” says Gammon. “Now they want statements from the past three months to see how your business has been negotiated.” Hollingworth says lenders are eager to see “what revenue can be highlighted”. For self-employed workers or anyone who is aware of and with a reduced income, this could mean that a mortgage based on this sum is being offered, rather than what you would expect to earn normally.
A frustrating future
It will take some time for mortgages that require only small deposits to return, said Gammon.
“I don’t imagine lenders will rush back to the mortgage market at 95% – they will want to see what happens when the furlough program develops and also what happens to prices,” he says.
“I don’t think 95% of the mortgages will return before the end of the year.”
Case study: “Every little thing matters”
Niamh Spence is looking for a home near Manchester. The 29-year-old public relations manager sells a property she bought with an ex-partner and hopes to move to her own place.
“I am looking around the £ 130,000 to £ 140,000 brands, so I will benefit from the stamp duty cut. Every little one counts, so I’m happy. If you think that before the blockade there were 95% mortgages, I had to find an extra for the deposit to meet the new needs of the lenders who provide only 85%. The problem is that there are barely any mortgages for 10% of deposits and it’s so competitive – my broker says that if you don’t get there first thing in the morning you can’t get one from banks like HSBC. “
Spence is currently sketched, which didn’t help. “My mortgage is in principle based on the fact that I have a fixed salary. I can’t borrow anymore until I get back to work, so I’m looking for something based on what I can currently do.
“I know a lot of people who are in the same position and I’m lucky to get back to work because I know there are many who are facing redundancy. I am selling to a buyer for the first time and I am not in a chain, but it is difficult. I wish the government had encouraged lenders to come back to offer mortgages to those with 5% as asking for 10% or 15% can mean the difference of £ 5,000 or £ 10,000. “