TSB has paused its new build lending at 90% loan to value and will cut multiples for self-employed borrowers.  

The bank says in light of the ending of the government’s Help to Buy scheme, it will “temporarily” halt 90% LTV loan “while we watch how the market develops”.   

Its maximum LTV for new build houses and bungalows moves to 85% from 90%.  

The lender will also tighten lending criteria for self-employed and buy-to-let stress rates, in a move that will see the maximum loan-to-income multiple for self-employed applicants cut from 5.00 times to 4.49 times income.   

It adds that the stress rate for background BTL mortgages, on residential mortgage applications rises to 7% from 5.5%.  

The business says that any decision in principle, or pipeline applications, started before 12 December, will not be affected by these changes.    

Dimora Mortgages director Jamie Lennox says: “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.”  

EHF Mortgages managing director Justin Moy adds: “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 to 18 months.   

“More emphasis on lower LTV remortgage business, and product transfers, would be easier for the lender to manage in the short term.   

“This is disappointing for many first-time buyers, but with the higher rates already in place, many would have aborted their plans to move for the time being anyway.”  

Earlier this month, the government added a one-month extension to the Help to Buy, after building backlogs threatened to scupper deals.     

The Department for Levelling Up, Housing and Communities now says builders will now have until January 31 to finish building homes under the scheme and organise new-home warranties, a move that pushes back the original December 31 deadline at the end of this year.    

The aim of the extension is to give hundreds of homebuyers enough time for their homes to be built after supply chain issues and labour shortages have hit building schedules, in advance of the scheme, first introduced in 2013, which comes to an end on March 31.