Nearly half of all 90% Loan-to-value (LTV) mortgage deals have been withdrawn from the market this week.
It started with mortgage lenders Accord and Virgin Money and then Ipswich Building Society also pulled theirs due to sheer volume of applications.
Virgin had an increase in applications and decided to withdraw the 90% LTV product to concentrate on their current pipeline (applications in process). They have suspended purchase and re-mortgage deals, also their New-build 2- and 5-year fixed rates. Only customers that wish to transfer products without additional borrowing can still benefit from the 90% LTV mortgage.
Accord saw a high volume of applications when offering the 90% LTV mortgage to residential house purchases and re-mortgage applications back on the 20th May 2020. Their decision to withdraw the application was to manage demand and reduced the impact to service.
Clydesdale withdrew their 90% LTV product after re-introducing higher LTV lending last month.
It has now moved on to a stampede of lenders withdrawing higher loan to value products.
Why Are Mortgages Being Withdrawn?
Lenders fear recession. Recession means mortgage redundancies and mortgages going into arrears.
Recession means house prices will fall.
Falling house prices means mortgage lenders are exposed to negative equity if they lend money and then house prices fall below the debt owed. By reducing loan to values now and only lending to those with larger deposits it means mortgage lenders become less exposed to falling house prices.