TSB pauses new build lending at 90% LTV and cuts multiples for self-employed; brokers react

by | Dec 12, 2022

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From today, the TSB has announced it is pausing new build lending at 90% LTV and has cut multiples for the self-employed. Also, it says the stress rate for background Buy to Let mortgages, on Residential mortgage applications, is increasing from 5.5% to 7.0%. What does this signal for the mortgage market? Brokers have been sharing their views on this latest move as follows:

Jamie Lennox, Director at Dimora Mortgages comments: “These changes are a clear signal to the industry that there are concerns about house prices dropping and the real risk of negative equity. With new builds typically costing a premium, there is a greater risk to the bank if they have to repossess the property that the “new property premium” is lost and results in it being worth less money on the resale market.”

Justin Moy, MD at EMF Mortgages: ” Mortgage lenders will inevitably look to reduce their new build lending to those with small deposits, given the expected property price trends for the next 12/18 months. More emphasis on lower Loan-to-value (LTV) remortgage business and product transfers will be easier for lenders to manage in the short term. This is disappointing for many first-time buyers, but with the higher rates already in place, many will have aborted their plans to move for the time being anyway.”

Craig Fish, Founder and Director at Lodestone Mortgages and Protection, says: “It’s a commonly held view that new builds are overpriced, and with property prices on a downward slide, this ‘new home premium’ is set to quickly disappear. Lenders are of course going to quickly distance themselves from this risky area and focus on more run-of-the-mill lending to protect their mortgage book and bottom line. This is a clear signal that, at this level, negative equity poses a real risk. As for the change to the self-employed income multiple, well this is a non-story as most lenders operate at this level anyway. Other lenders in the market can be approached who will assist, but it is a shame that the options available to those who are the cornerstone of British business are being limited.”

 

Graham Cox, Director at Self Employed Mortgage Hub, comments: “The reduction in the maximum loan-to-income (LTI) multiple for self-employed applicants brings the TSB in line with the vast majority of lenders. Very few offer more than 4.5 times income, and then usually only to higher earners. So it’s not hugely significant in the grand scheme of things. Nevertheless, this announcement shows how lenders are becoming more cautious.”

Gary Boakes, Director at Verve Financial says: “With the majority of new build houses sold at a premium, it is not a surprise that lenders are taking precautions against what will inevitably be negative equity. Lenders are already pulling 2-year deals at 95% LTV, which just goes to show that lenders are worried about the expected pricing drops. The self- employed multiple cuts are just falling in-line with a lot of lenders, but it is not great news for the self-employed either way.”

 

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