Lenders have been pulling high loan-to-value (LTV) mortgages because of the coronavirus pandemic, but the Bank of Mum and Dad could step in to help out first-time buyers.
Mortgage broker Private Finance says that it expects a surge in capital-raising for first-time buyers as the Bank of Mum and Dad fills the void left by the banks. Many lenders stopped offering loans to first-time buyers after lockdown measures were introduced in March, effectively freezing the market. Those who want to buy their first home are now forced to find larger deposits and apply for lower LTV loans, which are still available.
Mortgage lenders are worried about the impact of the coronavirus pandemic and weakening job market on the homeowners that owe them money. Many have reacted by pulling out of what they would see as riskier areas of lending, chiefly to first-time buyers, who are at greater risk of default.
Lots of lenders are also having staffing issues as a result of the pandemic and have delays with processing mortgages. Banks and building societies have also had to shift resources because of the volume of calls from borrowers looking to take out a mortgage holiday. The re-opening of the housing market in May has released a lot of pent up demand, leading to a surge in mortgage applications. So in order to deal their existing workload, lenders are having to temporarily withdraw products.
However, parents who are gifting money to help their family onto the housing ladder could end up facing an uncertain retirement. Many are using their pensions and savings to help out and this could leave them facing poverty when they retire.
About the Author: Glen Callow
