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08 September 2020

Lenders continuing to tighten criteria is clearly still a significant issue for people with small deposits, as Knowledge Bank recorded that ‘Temporary Maximum LTV Restrictions’ topped broker searches last month for the sixth month running. While there is much news about lenders introducing or pulling new products this clearly shows that LTV restrictions are having a very real impact on borrowers and their ability to buy or remortgage.

Terms relating to coronavirus have dominated broker criteria searches for six consecutive months in residential, second charges and bridging loans. This offers strong indicators that the housing market continues to be impacted by the pandemic as lenders remain cautious.The uncertainty that Covid-19 has left within the market, has meant that restrictions continue to be placed on LTVs and the number of products offered to consumers.

In the residential market, this was enhanced by the continued searches for ‘Covid-19: Furloughed Workers’ which has featured prominently in the residential market since April. We expect to see searches relating to furloughed workers increase in the next two months as furloughed buyers attempt to get mortgages approved before they are faced with potential uncertainty over employment when the furlough scheme ends at the end of October.

‘Maximum Age at End of Term’ was in the second top spot for residential. One reason for this could be recent news that 23 per cent of homebuyers are reliant on the ‘bank of mum and dad’ post-pandemic. If parents or family members are helping to secure mortgages, their age may well be taken into account before approval is granted. The mortgage could therefore be limited by the age of the parents or family members offering a helping hand, impacting mortgage terms.

A particularly noteworthy new search in the bridging market is ‘Commercial Property’ which could be making an appearance because lenders are tightening their grip on commercial lending. Additionally, it could be because companies are looking to expand capacity under new social distancing measures to enable workers to come back into the office.

Searches for ‘Holiday Lets’ is becoming a trend in the buy-to-let market, staying in the top five search results for August following the surge in UK holiday makers staying closer to home this year. As Covid-19 continues to impact consumer habits and holiday homes become increasingly desirable, this search is likely to feature prominantely for months to come, as people take advantage of the stamp duty holiday.

The equity release and self-build markets saw the biggest changes out of all seven categories recorded by Knowledge Bank, with only two of the five searches remaining consistent. A spike in searches for ‘Debt Management Plan – Ongoing / Current’ was evident in the equity release market. This suggests that more people may be getting into difficulties with their bills and might be looking to remortgage to try and reduce their monthly outgoings.

In the self-build market three new searches appeared in the top five results. The number of people searching for ‘Maximum LTV / Loan to Value’ indicates that more people are exploring the idea of taking out mortgages for self build projects. This could be linked to changing consumer habits and a trend in desire in buyers moving away from cities and prioritising outdoor space as a result of Covid-19. Many self-build properties are in more rural locations, affording people the freedom to have their own space.

Matthew Corker, lender relationship manager at Knowledge Bank, commented, “Broker criteria searches in August provided clear signs that the housing market is still being affected by Covid-19.

“It is evident that there is growing concern around mortgage eligibility with consumers across the board, particularly those looking for higher LTV mortgages. The looming end to the furlough scheme also continues to feature prominently as those on furlough attempt to get mortgages approved before their furlough ends.

“In a similar vein, more first-time buyers are increasingly reliant on family members to give them a helping hand to get on to the property ladder, which is impacting the maximum age at the end of the mortgage and may also have a longer-term impact on equity release options.

“Coronavirus has impacted consumer habits, and we are beginning to see the wider trends taking place as a result of this with buyers and lenders alike.”

Criteria Activity Tracker

Top five searches performed by brokers on Knowledge Bank during August 2020

	RESIDENTIAL	BUY-TO-LET	SECOND CHARGES	EQUITY RELEASE
1	COVID-19: Temporary Maximum LTV Restrictions	Lending to Limited Companies	Maximum LTV / Loan To Value	Maximum Loan Amount
2	Maximum Age at End of Term	First-time landlord	COVID-19 : Temporary Maximum LTV Restrictions	Early Repayment Charges
3	Self-employed – 1 year’s accounts	Requirement to be a Homeowner	Child Benefit	Minimum Loan Amount
4	Help To Buy Equity Loan Scheme	Minimum Income – Interest-Only / Part-and-Part Single Applicant	Right to Buy	Flat Roofs
5	COVID-19 : Furloughed Workers	Holiday Lets	Capital Raising  - Purchase a Buy To Let	Debt Management Plan – Ongoing / Current

	SELF-BUILD	BRIDGING	COMMERCIAL
1	Maximum LTC - Loan to Cost	Regulated Bridging	Semi-Commercial Properties
2	Maximum LTV / Loan to Value	Maximum LTV	Maximum LTV for Commercial Investment
3	Stage Payment Type - Advance	COVID-19: Temporary Maximum LTV Restrictions	Minimum Loan Amount
4	Timber Framed Construction	Minimum Loan	Commercial Owner Occupier
5	Lend against Land	Commercial Property	Minimum Property Value

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