David Hollingworth, at L&C Mortgages, says: “Lenders’ temporary withdrawals from offering deals to those with smaller deposits means that the availability of mortgages up to 90% LTV and beyond remains extremely limited. Even rates at 85% are changing at pace, with lenders often chopping and changing their pricing as they manage volume. They are not necessarily withdrawing deals altogether but it can mean that rates are nudged up, as lenders are faced with strong demand.”
He added, “If consumers can push to a larger 15% deposit, then they will open up a broader choice as well as benefiting from better rates.”
Some of the lenders that did pull out temporarily have come back with some products up to 90% LTV. But these may be more limited in scope. For example, Accord has come back to the market but made their 90% mortgage available to first-time buyers only.
Nationwide has also launched a 90% LTV. It is available to first time buyers only and for borrowing over a maximum term of 25 years on houses or bungalows but not flats or any new build property. There is also a requirement for the deposit to predominantly come from the applicants own funds and only 25% can be a gift.
On the eligibility requirements, David Hollingworth commented, “All these criteria and others are designed to put the brakes on the volume of business to try and tailor it to the desired capacity. It’s certainly significant to have a big lender like Nationwide re-enter this market and hopefully it will help encourage others to join, as a broader spread of lender and product will all help to make it more sustainable.”
The 95% mortgage market remains virtually non-existent at the moment.
Lenders continue to be kept busy with mortgage holiday applications, which have now been extended beyond June to end October 2020.
According to UK Finance 1.9 million mortgage payment holidays have been issued as of June 2020 – equivalent to a sixth of all mortgages in the UK.
Remortgaging in August 2020
Mortgage rates are still low which is good news for remortgage borrowers looking to get a better deal in place.
If you are approaching the end of your current mortgage deal, particularly in the next three months, you can still take advantage of some very attractive rates, irrespective of Loan to Value.
What’s new this month?
Despite there being some speculation that the Bank of England may need to consider taking the Base Rate into negative territory there is little sign of borrowers shifting away from their preference for fixed rates.
Some may like the idea of a tracker to benefit from any cut but it’s important that borrowers understand the terms of any variable deal. Some trackers will limit the potential for any fall by applying a minimum rate, often referred to as a collar or floor. A discounted rate is pegged to the lender SVR so there’s no guarantee the lender will move in line with base rate in any case.
Add to that the fact that some fixed rates have been getting more competitive and we can expect to see borrowers continuing to take advantage of the ultra low rates and lock-in their deal. Some two year rates are now below 1.20% and 5 year fixed rates offer a wide choice below 1.50% with some edging below 1.40%.
Barclays have also just launched a new 10 year fixed rate. It has brought the lowest rate on a long term deal below 2% to offer outstanding long term security for borrowers that are prepared to lock in.
Borrowers will need to think carefully before jumping in. Early repayment charges on long term deals usually persist throughout the fixed rate period. Whilst you can port the mortgage, flexibility will be limited if you need to review at any time in that 10 years.
For example, if top up borrowing was required there is no guarantee that the lender would be able to offer the borrowing required or at what rate. That could mean looking elsewhere, which would incur an early repayment charge which could amount to thousands of pounds.
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