Back to ‘normality’ for mortgage lenders – Birmingham Post article 07.05.2020

The mortgage market is beginning to adjust to the coronavirus crisis.

Big lenders are reopening their doors to borrowers, making it easier to get a home loan.

And, while house sales are down, the prospects are much better than during the financial crisis of a decade ago.

There have been similarities – fewer loans, lower loan to value ratios, a focus on existing customers, and delays in processing applications.

Dr Ana Canhoto, of Brunel University, said: “Surveyors can’t visit properties due to the lockdown, meaning that they can’t fully assess the value of a property.

“Second, some staff in banks are isolating, others are furloughed, and the remaining ones are dealing with a spike in enquiries about mortgage payment holidays, meaning that lenders have limited staff availability.

“Third, the uncertainty about the duration of this crisis makes it difficult to predict its economic impact (and) the affordability of the loans several months down the line.”

However there is one big difference.

She went on: “Twelve years ago many – if not all – financial institutions were finding it very difficult to raise money in the secondary market and, as a result, they had less money available to lend. That’s not the situation, now. There is money available.”

At the outset of coronavirus, several lenders scrapped deals or only offered loans to those with large deposits.

But the sector is getting used to life under lockdown, both adapting and innovating.

For example, lenders have turned to using system-generated, or “drive-by”, valuations to get property purchases and re-mortgages agreed.

As a result confidence is returning and in recent weeks Nationwide, Halifax, Virgin and Santander have all made it easier for people to qualify for a loan.

Mortgage broker Greg Cunnington, of Alexander Hall, commented: “Most will continue to accept mortgage applications, for both purchases and re-mortgages, for clients who have been furloughed.

“However, typically they will look to use 80 per cent of the normal income for their affordability assessments of the new mortgage (to be in line with the income you will receive from the job retention scheme).

“Some lenders have now confirmed that where the employer is topping up your income to 100 per cent of your normal salary then this can all be taken into account.”

Indeed loan to value has crept back up to around 85 per cent in many instances.

Borrowers typically will still need a deposit of at least 10 per cent and lenders will want to know if people’s income has reduced as a result of the coronavirus.

All major lenders remain open for self-employed applicants too.

Mr Cunnington added: “Some lenders are now requesting the latest three months’ business bank statements for all new self-employed applications.

“These will then be manually assessed by an underwriter, with the lenders wanting to see the income has not been negatively impacted.

“A good intermediary will be able to help guide you through these documentation requirements and can also speak to the underwriters at the lender pre-application to get a good idea on if your scenario would fit their current criteria.”

People on a repayment break would usually be denied a product transfer, pushing them onto a costly Standard Variable Rate (SVR).

But lenders have decided such borrowers will be able to move onto a new deal.

Stephen Jones, chief executive of UK Finance, told Mortgage Solutions: “The industry has taken decisive steps to ensure that eligible customers on payment holidays due to Covid-19 can opt for the security of fixing their monthly mortgage payments going forward.”

The trade body says more than 1.6 million borrowers are currently on mortgage holidays.