27 March 2020

Lenders temporarily pull products and reduce LTVs but liquidity is not the issue

Halifax sent a note to brokers yesterday saying that it is restricting new lending to a maximum loan-to-value of 60 per cent. This follows a communication from Barclays on Tuesday saying that it was pulling a number of deals across its residential and buy-to-let ranges.

With other lenders also pulling products, such moves may concern borrowers that there is a funding crisis but there isn’t. The banks are awash with liquidity. However, there are other issues which they are dealing with.

The first is a processing one – banks are not all set up for staff to work from home. The big processing centres are closed and they are operating with a skeleton staff. Those staff that are working are focusing on arranging payment holidays.

Lenders are rightly throwing all their resources into dealing with payment holiday requests. But in the same way that people are stockpiling food they don’t need, there are borrowers who are asking for payment holidays when they don’t need them. This is blocking the phone lines for those who do. Borrowers should ask themselves: can I pay the mortgage this month? If the answer is ‘yes’, then they should keep off the phone to their lender and let those who do need a payment holiday get through and arrange one.

There is also an issue with valuations. A lot of the big lenders will accept desktop valuations but only up to a certain LTV. As they can’t get a valuer out to inspect the property, it is very difficult to process a mortgage application for a higher LTV, hence the restrictions which have been brought in.

The coronavirus and lenders’ response to it is all still very new. Let’s hope that it won’t be long before the necessary adjustments have been made so that they can get back to ‘business as usual’ or as close to it as possible. In the meantime, the team at SPF Private Clients are on the end of the phone or on email if you need any advice.

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