Lenders pull back from higher risk mortgage loans
TSB has removed all its mortgages at 85 per cent loan to value (LTV) and HSBC has raised rates at both 85 and 90 per cent LTV, as lenders pull back from borrowers with low levels of equity or deposits.
Just two days ago TSB removed a raft of its mortgages at 85 per cent LTV, and now has removed any remaining deals at this level.
This includes house purchase, remortgage, shared ownership and shared equity products.
TSB head of intermediary mortgages Beverley Bradford said: “As part of our regular review of our products, we have removed a set of products while we make changes to our existing range of mortgages.”
At the same, time HSBC has raised rates on a number of two-, three- and five-year fixed rate mortgages at 85 and 90 per cent LTV.
The bank is the only big lender to have offered 90 per cent LTVs throughout the coronavirus outbreak and lockdown.
However, HSBC has put limits on daily lending at this level to manage demand.
Some mortgage advisers report that by 8.30am the day’s cap has already been filled.
It comes after Accord and Virgin re-entered the 90 per cent LTV market after the property market reopened, only to withdraw this week citing high levels of demand.
Tipton & Coseley pulls 90 per cent deals
A number of building societies have followed suit and taken 90 per cent LTV off the market.
The Tipton & Coseley Building Society is one of the latest to remove deals at this level.
However, Coventry Building Society has bucked the trend and is launching two deals for borrowers with a deposit of 10 per cent on Friday.
Phil Bailey, sales director at Twenty said: “It’s sad and even maybe a little difficult to see these 90 per cent LTV products being removed from the market.
“From a lenders’ perspective, there’s a need to balance a complex mix of rates, default risk, house price risk, and the volume of operational resource available to them to process mortgages.
“Getting 90 per cent LTV mortgages can often take more manpower at the lender’s side, and with furlough, people off ill and all the other domestic and personal challenges that Covid brings, it’s no real surprise that these products are being withdrawn.
“When I speak to lenders, it’s clear that they do want to lend at 90 per cent.
“Margins are good at that level and it’s clearly important for the chains to work to draw in first time buyers with 90 per cent products.”
He added that this was a real challenge for the government which has backed a housing-led recovery that could be at risk of faltering if products are not available in the market to satisfy demand.
Bailey noted the volume of products available is still only around 50 per cent of pre-Covid levels, although this had dropped as low as 33 per cent at one point.