Analysis of residential market by Moneyfacts.co.uk, timed to coincide with the end of many mortgage holidays, presented a market which has shrunk at all LTV tiers by half since the start of the pandemic. It showed the total product count had plunged from 4,969 in January to 2,748 on 26 June.

It was in the 90% LTV market where the difference was particularly stark, with numbers in the early part of the year rising from 751 in January to 779 in March but tumbling to a low on 26 June of 72.

In April, as the pandemic reached its peak, numbers dropped to 326 and then further to 100 in May. Although there was a small spike at the beginning of June where numbers reached 183, they plummeted again to reach 72 last week.

Fluctuations

The early June ‘bounceback’ was experienced across the LTV tiers except the 95% range where numbers have been on a continual downward trajectory which reached just 14 last week.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “The recent product count fluctuations have been mainly focused around the higher-risk, higher loan-to-value (LTV) tiers which can be explained by a number of possible factors.

“There has been an overwhelming level of demand from borrowers seeking products in these sectors, leading to some lenders who had relaunched offerings needing to pull them back to ensure their workload could be managed.”

Negative equity

Williams added: “The potential for negative equity issues should house prices slump is now also a spectre. This will be especially disappointing to first-time buyers where there are a limited number of products available to those with a smaller deposit at a time where savings rates fall to new lows.

“Lenders moving forward may need to assess how they intend to approach widespread extenuating circumstances and the risk these may bring to their lending decisions, such as gaps developing in household incomes and also other economic impacts that may directly affect the affordability of household borrowings.”

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