In response to the disruption of the coronavirus pandemic, UK mortgage providers have significantly reduced their offerings. Prospective owners and movers hoping to obtain a new mortgage have seen their hopes dashed, with lenders collectively cancelling their existing home loan deals in a major market shift.
Tuesday saw significant action in this trend, with Nationwide essentially ending offers on any new deals – a major indicator from one of the largest lenders in the country. It’s expected that other lenders will do the same in what may prove to be one of the biggest single shifts in the economy’s history.
What do we know? In the case of Nationwide, home loans are only being offered to individuals who have over 25% equity. In a country already experiencing what many refer to as a ‘renting generation’, this decision by such a major lender shuts first-time applicants out entirely. The good news for ongoing applications? Nationwide will still process them under previous specifications.
What are these lenders doing?
COVID-19 is causing understandable ripples across the entire UK and global economy. In many cases, industries are simply being disrupted due to sudden spikes in action and interest by clients and customers. In the case of the mortgage market, Nationwide is on record as blaming the staggeringly high number of enquiries relating to ongoing applications and existing mortgages.
In Nationwide’s words, they hope to “continue supporting the housing market” by offering home loans of up to 75% LTV. Other major lenders, including Skipton and Santander, have matched this in spirit by reducing their LTV to 60%.
Why is this happening?
The pandemic has caused a sudden spike in withdrawals of high LTV mortgage products and home purchase products. Fortunately, this isn’t expected to remain this way; it is instead a temporary emergency measure the market is performing in response to the pandemic and its effect on the economy. For major lenders like Nationwide, the weeks ahead will be a scramble of frenetic activity as they seek to stabilise their products and reach a consensus on what they can safely offer to their customers in the months ahead.
Staffing is also contributing to the move by lenders like Nationwide. At a time when reaction time is key, lenders are paralysed by a lack of staff and the rapid shift to remote working. In this way, we can see the drastic measures taken by major lenders as a temporary safeguard that will, we hope, stabilise soon.
Don’t worry if you’ve already got a mortgage
As we covered above, there’s nothing to worry about if you’ve already got a mortgage; lenders like Nationwide have assured their existing customers they won’t be affected by the new measures. This goes for applications that are already ongoing but not completed – you’ll be fine too.
If you’d like to have a chat with a member of the Digiconomy team about our coverage of this ongoing subject, feel free to reach out by calling us on 01202 798 549 or use our contact form.