23rd April 2020
A number of weeks ago, as the scale and magnitude of the Coronavirus pandemic became apparent, some of the UK's largest lenders tightened their mortgage lending underwriting, restricted product offerings and adjusted mortgage deals to reflect the increasingly uncertain situation. Some of the biggest lenders battened down the hatches and introduced a maximum 75% loan to value (LTV) ratio (with some going further and requiring 60% LTV) and some withdrawing from offering new loans altogether.
In essence, much of the mortgage industry went into 'lockdown' together with the rest of the country as lenders tried to assess the additional risks from the virus, deal with staffing issues and divert considerable resources to deal with the wave of applications for mortgage holidays, with approximately 1 in 9 mortgage holders applying.
For the last month, lenders have only been willing to look at what they considered to be 'low risk' loans. And, all of this when interest rates continued to fall to historic lows as the Bank of England responded to the crisis by making two emergency cuts to the base rate. The current base rate of 0.1% is the lowest in the Bank of England's 325-year history.
Just as the Government announced that lockdown and social distancing measures will be extended, it seems that lenders are increasingly coming to terms with the current situation and starting to relax some of the conditions and restrictions they imposed just a few weeks ago. This week, Nationwide reintroduced loans at a 85% LTV as did the Halifax. HSBC is now accepting desktop valuations up to 90% LTV and Sanatander has increased its maximum loan size from £300,000 to £500,000. Virgin Money has also began to offer mortgage products again.
It would appear that lenders are adapting business practices and underwriting policies to be more accepting of the circumstances presented by the Coronavirus, including in particular, an increased willingness to accept desk top or 'drive by' valuations. While lending and property markets undoubtedly face uncertain times and a level of disruption over the coming weeks and months, it seems that lenders at least, are starting to adjust to the unprecedented conditions and challenges.
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