Mortgage lenders: LTV player

UK lenders appear to have forgotten the jangling sound of keys dropped through the letterbox. Enthused by the chancellor’s stamp duty holiday, pent-up demand and a dip in home prices, Nationwide this week reinstated its 90 per cent loan-to-value ratio for first-time buyers.

When coronavirus took hold lenders pulled their riskiest products. Almost two-thirds of the 183 deals available at 90 per cent LTV disappeared in June, according to Moneyfacts. That left just 70 available at the beginning of July. Loans offered at 95 per cent LTV more than halved over the period, to just 14.

Nationwide, the UK’s second-biggest home loan provider, has been quick out of the gates. Too quick. It is less than a month since the lender withdrew higher-risk mortgages. The environment — for all chancellor Rishi Sunak’s efforts — remains gloomy. Jobs are disappearing; relentless corporate cost-cutting suggests more to come. The fact more people may jump into the housing market is based in part on a tiny 0.1 per cent dip in home prices. That is taken from a very small number of approved loans: just 9,300 in May, an eighth of February levels, according to Nationwide.

Lenders are damned if they do and damned if they don’t. They are obliged to do their bit to spur growth through lending, but are left holding negative-equity properties if it all goes wrong. Britain’s bifurcated property market — resilient prime London spots, poorer regions with plentiful supply — makes it hard to generalise. But falling prices have combined with job losses to prompt people to cut their losses and return the keys to lenders in the past. The financial crisis left 7 to 11 per cent of UK owner-occupiers in negative equity by spring 2009, according to estimates by the Bank of England, which added that for most the amount was “relatively small”. The pandemic has snagged broader swaths of the economy than 2008/9. Its impact, and spread, is still growing. This is not the time to encourage riskier loans.

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