Halifax, Lloyds and Barclays are among the first major lenders to restrict the size of new mortgage loans, as the financial impact of the coronavirus spreads to the housing market.
Lloyds Banking Group – which includes Halifax and Bank of Scotland – has taken the most significant step and temporarily pulled most deals above 60 per cent loan-to-value (LTV) for both buyers and people remortgaging.
Barclays has withdrawn the majority of its mortgage deals above 60 per cent LTV for purchases for new buyers.
This move means homeowners will need at least a 40 per cent equity in your home to get a remortgage deal with Lloyds or Halifax, and a minimum deposit of 40 per cent to get a mortgage with Lloyds, Halifax or Barclays if you’re buying a home.
Coronavirus has ‘a direct impact’ on lending
Halifax, in an email to brokers, said: “The Covid-19 situation is changing on a daily basis and we continue to adapt our service to ensure continued support.
“This has had a direct impact on our available processing resource and we have therefore withdrawn new mortgage and remortgage products across our residential range with a loan to value ratio of over 60 per cent.
“We will also continue to focus on our existing Halifax customers and support them with payment holiday arrangements for financial support.
“This is very much a temporary move while we deal with the current situation and we will keep you updated regularly.”
Mortgage market send back to credit crunch era
Andrew Montlake, managing director of mortgage broker Coreco, said: “The Halifax’s decision to stop lending above 60 per cent LTV reflects the wholesale recalibration of risk that is unfolding in the mortgage market.
“Not since the credit crunch have we seen lenders make such a flight to quality in limiting products to 60 per cent LTV and below.”
He added: “The issue will be that many remortgage customers may be forced to either stay with their existing lender or revert to more expensive standard variable rates until this crisis is over.”
Smaller lenders look likely to become more risk-averse over the coming weeks, said brokers.
Several have started withdrawing high loan-to-value (LTV) products. Kensington, Progressive Building Society and Foundation Home Loan have pulled their entire mortgage ranges on an 80 per cent LTV of above, according to price comparison site moneyfacts.co.uk.