How will lenders removing product ranges affect borrowers?
With a number of lenders announcing the removal of their mortgage product ranges, as well as introducing caps on LTVs, how will this affect the average borrower?
Mortgage Introducer asked industry members what affects they believe lenders safeguarding themselves will have on borrowers.
Vadim Toader, chief executive of Proportunity believes that lenders recent product changes will block any chance of home ownership for many first-time buyers.
As the minimum deposit for a large number of lenders has increased from 5% to 40%, Toader outlines in monitory terms that the average first-time buyer in London will now need a £180,000 deposit, up from £22,500, for property valued at £450,000.
Toader said: “Some of these potential buyers are in situations where they ‘need to buy’, such as couples expecting a baby or people who have to move out as their tenancy agreement expires.
“We understand that these are uncertain times and lenders need to practice caution, but for some these measures will cause an unnecessarily strenuous experience, on top of an already stressful pandemic.”
Furthermore, Toader said that many borrower’s who were midway through the house buying process with deposits below 40%, now have to search for ways of quickly bridging their deposit gap.
Toader believes this highlights the “banks’ poor adoption of technology, particularly with mortgage lenders, which are the slowest adopters of cutting-edge technology.”
He added that the reduction to the maximum LTV is a result of an overly heavy reliance on human valuers, which are now unavailable due to the lockdown.
Toader stresses that, “had lenders adopted digital valuations of properties, this lockdown of the property market could have been averted.”
Nick Morrey, product technical manager at John Charcol, believes that lenders contingency plans have been found lacking.
He added: “Hopefully lenders, along with other businesses, will have to amend their work practices accordingly should (and when) something like this happens again.”
However, Morrey said that as inspections are mandatory for higher LTV transactions, it was a logical step for many lenders to withdraw their most problematic products.
He added that lenders should be applauded for allowing desktop valuations to LTVs above 75% and sometimes 90% or higher in order to continue servicing those consumers.
Morrey believes that it is now about “who can come back to offering their normal level of service the quickest and can they do so successfully.”