24 September 2020
Lenders chopping and changing to handle demand
The housing market continues to thrive, with HMRC revealing that transaction numbers rose by 15.6 per cent in August compared with the previous month. One of the knock-on effects of this uptick in business is that lenders, surveyors and solicitors are dealing with heavier workloads, resulting in transactions taking longer than one might normally expect.
One of the ways lenders are dealing with this rise in demand is to chop and change their product ranges as they try to keep up with customer demand and retain acceptable service levels. Halifax was the latest lender to make changes this week, pulling its two-year remortgage range and replacing it with a three-year option instead, to accompany its usual five-year fixes. With a three-year fix available from 1.17 per cent at 60 per cent loan-to-value (LTV), Halifax has become no less competitive on pricing, suggesting that the move wasn’t about improving margins/profits.
Given the volume of business Halifax receives via brokers, usually focussed on two and five-year products, the lender is hoping to slow the volume of applications coming in by not offering two-year money. Customers who are desperate for a two-year fix can still get one if they go direct to the lender but that, of course, comes with potential hassle and delays.
Halifax is not alone; most lenders are tweaking rates here and there, with higher LTV deals in particular becoming more expensive – Santander and Virgin Money are among lenders raising rates recently. On the buy-to-let side, however, some of the specialist lenders are getting keener on price, so there are some good deals out there to attract investors.
Lenders are concerned about the health of the economy and the impact of a second spike in coronavirus. There are also fears that the rise in property prices is directly linked to the stamp duty holiday which comes to an end on 31 March, and the worry is that prices will then fall, potentially leaving those taking on high LTV deals in negative equity.
Those requiring low LTV mortgages will find there is still plenty of choice at excellent rates. A mortgage broker will help identify the best lender to approach and steer the application through from start-to-finish to ensure any delays are kept to a minimum. Those with more modest deposits would also do well to seek advice, especially as lenders are pulling products at extremely short notice.