The return of the 95% LTV mortgage to the UK High Street came as welcome news for many thousands of first-time buyers. Ever since the financial crash almost 15 years ago, lenders have placed greater scrutiny than ever before on those they do business with.
Where an applicant is not clearly in a position to comfortably afford to repay a loan, rejection is guaranteed.
More recently, lenders have been urged to demonstrate greater flexibility where possible, both for the benefit of their applicants and for the wider economy, as the UK gradually climbs back to strength in the wake of the COVID-19 crisis.
With the 95% LTV mortgage back in business at a string of major lenders, it should be plain sailing for those unable to come up with a larger deposit.
What seems to be happening is actually quite the opposite; the idea of the 5% deposit mortgage is to enable more deserving and financially stable borrowers to get onto the property ladder. Instead, reports continue to emerge of mortgage applications being unfairly and immediately declined, despite the fact that the applicants in question can clearly afford a mortgage.
Excessive restrictions are enforced
Some brokers have said that despite the fact that 95% of LTV mortgages are government-approved, lenders are placing excessive and unfair restrictions on these loans. Unless the applicant in question has a 100% flawless credit score and is clearly sitting on a small fortune in personal wealth, they’re falling at the first hurdle.
And in doing so, I completely missed the idea of the government-backed 5% deposit mortgage initiative.
New-build properties are apparently completely out of contention for 95% LTV mortgages with the five biggest lenders in the UK. Even when people have held on to their jobs throughout the pandemic and built an outstanding track record financially, they are still being turned down routinely.
Experts believe it is simply a case of lenders attempting to cover themselves against what happened previously. Rather than assessing eligibility based on an applicant’s financial status today, they’re taking into account every possible scenario going forward.
A certain amount of due diligence in such regard is important, but the extent to which lenders are scrutinising applicants on the prospect that they might lose their jobs in the future is making the 95% LTV mortgage scheme considerably less accessible.
The importance of independent broker support
While such complications perpetuate, the importance of independent broker support will continue to grow. Brokers are gradually getting a feel for the 5% deposit mortgage landscape, along with the fact that lenders are actually taking 95% LTV loans seriously.
Taking an application directly to a major lender in the hopes of getting a mortgage with a 5% deposit is inadvisable.
To learn more about the government-backed mortgage scheme or to discuss your eligibility for a home loan in more detail, contact a member of the team at UK Property Finance today for an obligation-free consultation.