Our recent decision to increase the maximum loan to value (LTV) from 75% to 80% on our first charge mortgage products comes at a time when UK household budgets are continuing to face growing financial pressure.
Soaring energy costs, rising inflation and stagnant wages means many people are feeling the squeeze like never before, and with house prices continuing to increase at a rapid rate, deposit size continues to be a significant determining factor for homebuyers.
High LTV products took a bit of a battering at the start of the pandemic, when the introduction of social distancing rules in March 2020 saw many lenders withdraw their offerings as physical valuations were unable to take place as the housing market came to a standstill.
In fact, according to research conducted by comparison site Moneyfacts.co.uk, 2,656 mortgage products were withdrawn from the market between March and May 2020 alone, with high LTVs seeing the biggest reduction of all.
While the withdrawal of products was a cautionary response to the uncertainty brought about the pandemic, it did leave those with lower deposits facing the uphill battle of trying to save more money at a time when income levels were drastically impacted.
Two years on, and we are still living under the cloud of Covid, with additional factors such as the war in Ukraine, post pandemic job insecurity and increases in National Insurance Contributions placing even greater financial pressure on consumers.
In addition, house price growth is rising at the fastest rate in 15 years driven by lack of supply and growing demand, while household income is expected to drop by an average of £1,000 this year, according to Resolution Foundation, the biggest fall in real-term income in over 50 years. Therefore, it is easy to see why homebuyers are starting to feel the pinch.
For those people with a history of adverse credit, or for those who may have defaulted on payments during the course of the pandemic and now find themselves with a credit blip, this combination of factors means it is even harder to get onto the property ladder than ever before.
Even those who already have a mortgage but are looking to move home may find themselves stuck because affordability constraints are preventing them from securing another mortgage. All these people need options and it is here the specialist market can help.
The sector already caters for the growing number of consumers who find themselves falling outside the parameters of mainstream lending criteria either because they have an impaired credit record because of a missed payment or because they are one of the growing number of people with irregular income and employment and do not fit the mainstream mould.
Saving for a deposit to buy a home and securing a mortgage was already a challenge for many people before the pandemic, especially those repaying outstanding debts or holding an adverse credit record.
By increasing the LTV on our first charge mortgage products, we are opening up the market to these people and other borrowers such as those with low deposits and helping brokers to help more clients buy the home they really want or release capital from their existing property to help them achieve their home ownership dreams.
David Binney is commercial manager at Norton Home Loans
