Lending criteria changes problematic for brokers

The building society said its return to higher LTV lending was enabled by the temporary stamp duty cut, announced by the chancellor on July 8, as well as a “more active housing market” following the lifting of lockdown restrictions that had effectively closed the property market until May.

At the time, Henry Jordan, director of mortgages at Nationwide Building Society, said: “While we will continue to monitor the market carefully, we feel it is the right time to enhance our lending, initially to those looking for their first home. We welcome the government’s announcement on stamp duty and hope our combined changes create a positive impact on a market that, despite being in relatively good health, is still recovering.”

Halifax Intermediaries also announced a change to its treatment of bonus, commission and overtime income from July 8 in an email to brokers seen by FTAdviser, halving the allowable proportion used in its affordability assessment from 60 to 30 per cent.

According to the lender, the reduction was “to reflect there may be an increased element of variance in these income types”.
Chris Sykes, mortgage consultant at Private Finance, warned the reduction would be problematic for customers who look to remortgage and originally borrowed based on their bonus.

Mr Sykes added: “High net worth City workers could find themselves mortgage prisoners unless they search the whole of the market for lenders still doing bonus-backed mortgages.”

Help to Buy fills high LTV void

However, changes to income assessments have not been the only difficulty that brokers have had to contend with, as Mansfield Money’s Ms Tymon described the withdrawal of 95 per cent loan-to-value mortgages and the restriction of lending at 90 per cent LTV as the “biggest challenge”.

Knowledge Bank’s data showed the greatest number of changes to residential criteria in June occurred across ‘maximum LTV’ categories, including the limits for a ‘resale house’ and a ‘pound-for-pound remortgage’.

Ms Tymon added the shortage of high LTV mortgages meant brokers have had to “look at things differently” and offer alternative solutions, such as a Help to Buy equity loan and shared ownership.

Indeed, the Help to Buy equity loan scheme was the second most common search in residential lending by brokers in June, according to Knowledge Bank.

Alexander Hall’s Mr Cunnington said that amid limited options at high LTVs they had seen many buyers look to use the Help to Buy scheme, where most lenders were lending on “very competitive” terms.

Charles Morley, director of mortgage distribution at Metro Bank, commented: “The market has had to adapt to less mortgage products being available, especially at higher loan to values, where lending has been virtually non-existent and only a few lenders like ourselves are currently active.