Two of Britain’s biggest banks have pulled new mortgages for all but those with the biggest deposits or sizeable equity in their homes.
Barclays and Halifax’s intermediary brands have stopped selling mortgages above 60 per cent loan-to-value this week, as the housing market grinds to a halt amid the coronavirus outbreak.
The move triggered by the coronavirus outbreak is the biggest shake-up to the market since the credit crunch and echoes bank and building societies’ actions during the financial crisis.
It is not clear to what extent the banks have taken the decision due to staffing issues, with the country in lockdown and a wave of customers requesting mortgage holidays, or a concern that house prices could fall.
Halifax’s move to drastically slash its new mortgage lending temporarily comes despite the Bank of England cutting interest rates twice to their lowest levels
This means that those without a deposit or equity worth at least 40 per cent of the property’s value will no longer be able to secure a mortgage to buy a property, or even remortgage their existing home, with the two lenders.
First-time buyers and even those with decent equity in their homes may now find it more difficult to find the right deal as a result.
This comes despite the Bank of England cutting interest rates twice to the base rate’s lowest ever level of 0.1 per cent, making funding cheaper for banks than ever before.
And experts are concerned that more lenders may follow suit, limiting the availability of mortgage deals for borrowers.
Eleanor Williams, financial expert at Moneyfacts, said: ‘If the market experiences a large number of withdrawals of products geared towards first-time buyers, this will likely impact competition among providers and lower rates in this sector of the market may start to disappear.’
Andrew Montlake, of mortgage broker Coreco said that the move by Britain’s biggest mortgage lender Halifax was at least in part down to it being swamped by requests for mortgage holidays.
He said: ‘Not since the credit crunch have we seen lenders make such a flight to quality in limiting products.
‘In these unprecedented times, lenders, like a significant percentage of the world’s population, are going into lockdown.
Not since the credit crunch have we seen lenders make such a flight to quality in limiting products
Andrew Montlake, mortgage broker
‘The decision is part logistics, of course, but to stop lending above 60 per cent shows the seriousness with which it is taking Covid-19.
‘The issue will be that many remortgage customers may be forced to either stay with their existing lender or revert to more expensive standard variable rates until this crisis is over.’
Barclays told This is Money that their mortgage products have been withdrawn, so as to better manage the flow of new applications while some of its offshore sites have had to close down.
Banks and building societies have also begun pulling their tracker rate deals from the market, which track the Bank of England’s base rate directly.
Brokers slam ‘selfish’ borrowers for requesting mortgage holidays they don’t need
This week This is Money reported that some lenders are struggling to keep up with the volume of calls from customers requesting payment holidays.
One mortgage lender told This is Money: ‘We are seeing a huge spike in calls. The worry is that people can’t get through.
‘Some are calls from people who don’t need it – it shouldn’t be a free for all. At the moment they’re clogging up the phone lines.’
Today broker SPF Private Clients suggested ‘selfish’ borrowers who don’t need to take a payment holiday were putting stretched bank staff under further pressure and making it harder for those who do need a payment holiday to get through.
Mark Harris, chief executive of SPF Private Clients, said: ‘Lenders are throwing all their resources into dealing with payment holiday requests.
‘But in the same way that people are stockpiling food they don’t need, there are selfish borrowers who are asking for payment holidays when they don’t need them.
Mortgage broker Mark Harris has slammed ‘selfish’ borrowers for requesting payment holidays they don’t need
‘This is blocking the phone lines for those who do. Borrowers should ask themselves: “Can I pay the mortgage this month?”
‘If the answer is “yes”, then keep off the phone to your lender and let those who do need a payment holiday get through and arrange one.’
Harris said that banks aren’t restricting lending due to a lack of money, but that the closing of call centres has forced lenders to operate with a skeleton staff, most of which are focussing on arranging payment holidays.
He added: ‘There is also the issue with valuations. A lot of the big lenders will accept desktop valuations [a valuation where no property inspection has taken place] but only to a certain loan-to-value.
‘As they can’t get a valuer out to inspect the property, it is very difficult to process a mortgage application for a higher loan-to value.’
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