Since reopening last month, the mortgage market has seen some lenders taking their first steps back into the LTV market. Accord and Virgin were among the first to announce a return to 90 per cent for instance. These were welcome moves – the higher LTV market is a sector that is crucial for many first-time buyers and borrowers with smaller deposits. Yet soon after launch, some lenders have had to withdraw their products again.
What’s driving this trend is that the few lenders doing 90 per cent have had unprecedented levels of demand. In some cases, lenders have seen volumes over ten times greater than the normal daily average. Once one or two lenders made the decision to temporarily withdraw their 90 per cent options, others were sure to follow as a growing number of borrowers turned their attention to their products. And for the lenders that do remain, demand continues to be intense.
HSBC has been championing firms in this space, but the lender needs to limit the supply of product each day and frustrations are emerging – one comment I’ve heard is that getting a high LTV case with the lender was akin to buying Glastonbury tickets! We must ensure frustration does not turn into anything greater – I for one roundly applaud and thank HSBC for remaining in this part of the market.
More involvement from larger lenders will be needed in this market to spread the demand.
Some have asked both myself and others across the industry to help ‘organise’ a return. While on the face of it this may seem sensible, unfortunately competition laws mean that coordinating a return among lenders will not be possible. Instead, what we really need to see is the larger absentee lenders relaunching into this area of the market when they are able to but, crucially, as soon as possible. This will help to drive scale and stability. I have my fingers crossed that we may see movement soon, but I suspect we are at least two weeks away at the moment, with operational capacity remaining the key issue.
Eager to lend
The response from borrowers is certainly reason to be optimistic. After weeks of indications and anecdotal evidence, the rush from hopeful customers proves that house viewings and searches are now converting into mortgage applications and new business for advisers. Many clients are clearly still confident about their housing plans and their interest to press ahead is proving to be a real tailwind for the market as we emerge from lockdown.
Lenders recognise the pent-up demand that exists in the housing market and many are eager to move back to higher LTVs because higher LTV lending provides higher margins.
It is great to see Coventry Building Society relaunching its 90 per cent LTV range today. The decision to withdraw these on Monday to manage capacity and service levels is also a clear message that while lenders are keen to return, they are concerned about the volume surge this will create.
Likewise, I welcome today’s article in Mortgage Strategy by Accord’s Jeremy Duncombe in which he stated that the lender has a healthy appetite to lend once service levels allow. Operational barriers are all that remain. These are positive steps in the right direction and both Accord and Coventry should be applauded for providing such clarity and transparency to advisers about their decisions.
Lenders are rightly concerned about protecting their service levels – payment holiday enquiries are continuing to come through and it’s clear that the mortgage market still has a backlog of borrowers who want to move ahead with their housing plans now lockdown is easing. As soon as they are confident they can handle a sustained surge in volumes, lenders will return to the market.
Keep on moving
For lenders planning their return to this sector, technology will be key to helping maintain their operational resilience. Digitisation in the mortgage market has undergone revolution rather than evolution under the lockdown. It’s important that we progress from here and not just revert to previous habits as we become busier.
At Legal & General Mortgage Club we are continuing to lobby for a stable and active 90 per cent LTV market. It is a vital part of our industry that helps thousands of new homeowners and people with smaller deposits onto and up the housing ladder. The demand from borrowers is clearly there – that is a real reason to be optimistic about the future of our market – and I am confident that we will see a wider return to higher LTVs soon.
Kevin Roberts, director, Legal & General Mortgage Club