Nationwide Building Society has redefined its lending criteria for new mortgage applications, excluding bonus, overtime and commission as income, in response to the worsening coronavirus crisis.
The move comes swiftly on the heels of the decision on Tuesday to pull offers for low deposit borrowers. Simultaneously, the society has withdrawn mortgages above 75pc loan-to-value (LTV) from its online and broker channels, while restricting them for first-time buyers and customers seeking to remortgage.
Today, Nationwide, the UK’s largest building society, confirmed the new limits on the type of income it will accept which will become effective from tomorrow (Friday).
A spokesperson for the society said that while they continue to process as many applications as possible, in these unsettled times it is important that they act responsibly to ensure that members can afford their mortgage payments.
Consequently, bonus, overtime and commission will not be accepted as income on new mortgage applications until further notice, but this position will be kept under regular review. The changes apply to new applications as of April 2 but do not affect existing applications which will continue to be processed.
Whole of UK property market ‘paused’
While recognising that the coronavirus lockdown makes many aspects of buying and selling homes very difficult, if not impossible, the Government last week effectively paused the whole of the UK’s property market in order to avert a house price crash.
Without specifically banning property transactions, the Government is encouraging people in the initial phase of buying or selling property to postpone the process and has asked estate agents to hold off from marketing new homes and lenders to put mortgage offers on hold.
Alok Sharma, the Business Secretary, said that at this time people will understand that they should, if at all possible, put back their dates for completing and moving into new homes. Of course, for the majority of people, completion day and moving day are one and the same, unless the buyer happens to own two or more homes.
Exceptional demand for mortgage holidays
Nationwide is the most recent institution to withdraw mortgage products from the market as lenders scramble to cope with the impact of the coronavirus pandemic.
Lloyds Banking Group, which includes Halifax and Scottish Widows and is the UK’s largest lender, has put a ceiling of 60pc LTV on lending. While Vida Homeloans and Together Money have ceased all new mortgage lending, Barclays has restricted high LTV products and limited the number of mortgage applications it accepts from brokers.
On Tuesday, Nationwide said it was withdrawing from sale all fixed-rate and tracker mortgages above 75pc LTV for remortgage, first-time buyers and new house purchases.
The building society, the UK’s second largest mortgage lender, said it will concentrate instead on supporting existing borrowers and applicants during the crisis and explained that it had experienced an ‘extremely high’ number of inquiries from these groups.
Lenders’ customer service teams have been flooded with requests for mortgage holidays after the Government promised mortgage support for homeowners whose income has been affected by Covid-19.
Inquiries from buyers forecast to fall by 60pc
Sara Bennison, responsible for Nationwide’s products and offers, said the society needed to continue the levels of service expected of them in the face of an avalanche of inquiries regarding existing mortgages and ongoing applications.
That is why, she added, the society has imposed restrictions on a temporary basis. Continuing to offer home loans up to 75pc LTV, Bennison explained, means that Nationwide can continue to support the housing market.
The lender will keep an eye out for any updates to Government advice and would be grateful if members and brokers could show patience in this swiftly evolving situation.
According to Zoopla, demand from buyers fell by 40pc in the week ending March 22, and the firm has forecast an overall drop of 60pc in the coming quarter. However, the official pausing of the property market should help to alleviate the impact on prices of the drop.
Nonetheless, house prices are expected to be lower by the end of the lockdown period. First-time buyers may see this as an opportunity, not so sellers.