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Halifax and Barclays cap lending on many mortgages amid coronavirus lockdown

Halifax and Barclays have withdrawn many mortgages from sale this week, making it harder for borrowers with lower equity or deposits to get a new deal, as the impact of coronavirus starts to spread to the housing market.

Halifax has taken the biggest step and temporarily pulled most deals it sells through brokers. Deals with a loan-to-value (LTV) of above 60% offered through Halifax Intermediaries, Scottish Widows Bank and BM Solutions – which are all part of Lloyds Banking Group – have been withdrawn, for both buyers and people remortgaging. You can still apply for a mortgage with a higher LTV if going direct.

Meanwhile, Barclays has withdrawn the majority of its mortgage deals above 60% LTV for purchase by new buyers. That means to get a Barclays deal if you're buying a home you'll now need a minimum deposit of 40%.

It comes as a number of smaller building societies have also capped their LTVs in the past few days at levels lower than they were pre-coronavirus.

For full help on dealing with the impact of coronavirus, see our Coronavirus Financial Help & Rights and Coronavirus Travel Rights guides.

Why are mortgage lenders withdrawing deals?

In an email to brokers on Thursday, Halifax said that resourcing and valuation issues were behind its decision to withdraw many of its high-LTV mortgages.

L&C Mortgages associate director David Hollingworth said that lending above a 60% LTV threshold "tends to require a physical valuation of the property and, while the UK is in a state of lockdown, valuers are not being sent to carry these out".

Andrew Montlake, managing director at mortgage broker Coreco, added: "In these unprecedented times, lenders – like a significant percentage of the world's population – are going into lockdown.

"The decision of the Halifax is part logistics, of course, but to stop lending above 60% shows the seriousness with which it is taking Covid-19.

"With physical valuations on hold, for many lenders 60% LTV is the level at which they can engage their automatic valuation models effectively from a risk perspective, and process cases without too much human intervention."

A Barclays spokesperson said: "This action has been taken to support our colleagues in managing the flow of applications into our UK underwriting teams, following the closure of our key offshore sites due to restrictions put in place by local government related to coronavirus.

"At the same time, it enables our colleagues to provide greater help to those customers requesting mortgage payment holiday arrangements for financial support."

What measures are other mortgage lenders taking?

A number of smaller, more specialist lenders have also taken similar steps to reduce their level of high LTV lending, while some lenders – including Vida and Pepper  have gone even further and stopped accepting new residential mortgage applications entirely.

In addition, some mortgage applications that have already been submitted are now being put on hold by major lenders if they require a physical valuation which has not yet been carried out, according to Hollingworth. understands that part of the reason behind the scaling back among smaller lenders is reduced levels of staff, and lenders prioritising existing customers.

How can I find the best mortgage deal for me?

Before the coronavirus outbreak, many lenders allowed you to borrow up to 95% LTV, meaning many first-time buyers with a small 5% deposit could get onto the housing ladder (though the higher the LTV, the more expensive your mortgage rate).

Though this largely remains the same (for now at least), nobody can predict the future.

If you're looking for a mortgage or to remortgage, you can benchmark your best deal by putting your info into our Mortgage Best Buys comparison tool.

The tool has all deals that are available direct, and most that are available to brokers. It also factors in fees. The tool will also take into account the most recent changes made by Barclays and Halifax.

For more tips on how to get a good mortgage deal, see our Cheap Mortgage Finding guide. To learn more about the differences between fixed and variable mortgages (such as a tracker), see our What type of mortgage to choose? guide.

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