Two tier housing market emerges for borrowers with large and small deposits

A two tier housing market has emerged in the past fortnight as lenders have temporarily withdrawn from higher loan-to-value lending.

ESIS volumes, a proxy for borrowing activity, at LTV bands up to 80% have returned to pre-pandemic levels, and volumes at 80 to 85% have climbed more than 5% in a fortnight, according to lending technology company Mortgage Brain.

The picture reverses at higher LTVs, with volumes between 85% and 90% declining 7% during the past fortnight. Lending above 90% now accounts for just 1% of volumes, compared to 6.6% before the pandemic.

"The market is now particularly challenging for those with small deposits, such as first time buyers, but also the self employed and anybody that relies heavily on bonuses or commission to complete their income," says Hina Bhudia, Partner here at Knight Frank Finance.

"The lenders have grown particularly risk averse in the wake of the pandemic, and they have one eye on the wind up of government support schemes during the Autumn.

"If you have a smaller deposit, it's worth speaking to a broker that covers the whole of the market to ensure you get a full picture of what's possible under current circumstances."

The number of products available to borrowers climbed to 3.3% to 9,033 last week, a new high in the wake of the pandemic. Product numbers are up more than a fifth since the lowest point in April, though remain almost 40% below their pre-pandemic highs.

Whether you'd like to reassess your options, or just have a conversation with an informed advisor to better understand what these recent developments mean for you, please get in touch. Email us at support@knightfrankfinance.com