Banks tweak lending criteria, overhaul product lines to offset outbreak challenges

The number of products available has declined to 7,477, down almost half compared to the nine week average, according to lending technology company Mortgage Brain. While many lenders have cut the loan-to-value ratios they are willing to lend at, often settling between 60% and 85%, many are now tightening up their criteria, in many cases cutting the multiple of a borrower's income they are willing to lend to. 

"Before getting your heart set on a property or if you are getting close to a mortgage renewal period you've got to pick up the phone and be talking to an informed broker to see what changes are occurring in the mortgage market," says Hina Bhudia, partner at Knight Frank Finance. "Just in the past few days we've seen lenders change policy on loan-to-value ratios and acceptable income sources."

Banks faced unprecedented call volumes in the wake of two Bank of England emergency rate cuts, the introduction of three month mortgage holidays and the lockdown of many international based processing centres. Lenders have now offered 1.2 million mortgage payment holidays to households whose finances have been impacted by Covid-19, according to industry body UK Finance.

Though many have overhauled the product lines, some continue to lend at higher LTVs and others are being innovative with bespoke lending. HSBC, for example, continues to remortgage up to 90% LTV and applications are still being accepted at 95% LTV, though the availability of those deals is subject to demand.

Restrictions on movement have placed particular pressure on lending for house purchase with in-person valuations presenting acute challenges. In order to ensure transactions continue, automated or desktop valuations, once the domain of the high street lenders, are being rolled out by the private banks.