Mortgage lenders retreat from first time buyers with low deposits
Providers pull deals after a ‘tidal wave of business’ for riskier home loans.
Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
https://www.ft.com/content/68a3d6b6-d5c7-48ab-891f-d5769b353104
Mortgage options for many first time buyers have narrowed after a flurry of lenders withdrew low-deposit home loan deals from the market.
The move will have a disproportionate effect on people trying to get on to the property ladder, who accounted for two-thirds of mortgages with loan-to-value (LTV) ratios of 90 per cent or above, according to figures from the Financial Conduct Authority, the regulator, for the first half of 2019.
Virgin Money, Clydesdale Bank, Accord Mortgages, Ipswich Building Society, Melton Building Society and Furness Building Society this week pulled all products with a 90 per cent or higher LTV, with most citing a higher than expected demand for these loans but saying the move was “temporary”.
David Hollingworth, director at mortgage broker L&C, said that the options for low-deposit lending were already limited as the housing market emerges from lockdown. “When you’re one of only a few lenders offering high-LTV loans, that very quickly starts to look like something of a tidal wave of business coming in.”
Lenders are required to maintain a balance of risk across their loans, so if they experience a surge in demand for low-deposit lending, they typically look to choke off demand by raising the interest rates on their deals. Where so few lenders are offering high-LTV mortgages, a more effective option is to pull the deal from the market.