If you have been thinking about applying for a mortgage anytime soon, you may need to think carefully about your approach. With the coronavirus pandemic having slowed the economy to a crawl, the mortgage market has entered its own period of lockdown.
Up and down the UK, major banks and High Street lenders are scrapping their home loan deals at an alarming rate. One of the most recent of which being Nationwide, which to an extent has completely closed its doors to a sizeable proportion of the market.
Bad news for first time buyers and existing homeowners with minimal equity, as Nationwide is now demanding minimum 25% deposits on all home loans.
According to Nationwide, the decision was made in response to “an extremely high number of enquiries about existing mortgages and ongoing applications”.
“That is why we have taken this decision on a temporary basis although, by continuing to offer home loans up to 75% LTV, we can continue supporting the housing market,” they said, in an interview with BBC News.
Widespread and Growing
Unfortunately, the issue is by no means confined to Nationwide, or even a select handful of lenders. Major banks like Santander and Skipton Building Society have also placed new restrictions on their mortgage lending policies, as have Barclays, Halifax, Virgin Money and The Family Building Society.
Many of which have reduced their maximum loan-to-value ratio to 60%, meaning that applicants will need to come up with a minimum 40% deposit to qualify for a mortgage. This excludes the overwhelming majority of everyday consumers from the equation, for whom coming up with anything close to even 20% is practically impossible.
Economists have highlighted the growing threat posed by the coronavirus pandemic to the UK’s lending market as the reason for the escalating caution among banks and lenders. As even the biggest names on the High Street have no real idea what the future holds, they are becoming extremely cautious with who they lend to and how they allocate their financial resources.
Exploring the Alternatives
While it may be getting increasingly difficult to access a mortgage on the High Street, this does not mean there are not alternative options to explore. Particularly for first-time buyers and those with minimal equity in their current properties, the answer may lie in the services of an established broker.
If the High Street is effectively closed for business, accessing a mortgage means setting your sights beyond the High Street. Typically working with independent lenders that often do not work directly with the public, brokers are able to access deals on behalf of borrowers that are unavailable elsewhere.
Eligibility requirements vary significantly from one lender to the next, though are often nowhere near as severe as those of a major bank or lender.
The message is therefore simple – anyone looking to take out a mortgage in the near future should consider independent mortgage broker support mandatory. Unless you are able to come up with a deposit of at least 25% to 40%, your application is unlikely to be considered by the usual High Street names.