NatWest has become the latest in a wave of banks and building societies to restart lending to homebuyers with small deposits, after strong demand has allayed fears over UK house prices.
Mainstream lenders have been cautious about risky mortgage lending since the housing market reopened at the start of the summer, citing a lack of capacity to process loan applications and concerns that falling house prices could leave many borrowers trapped in negative equity.
On Monday, however, NatWest became the second high street bank in as many weeks to announce it would resume offering loans worth up to 90 per cent of a property’s value. It said its new mortgages would be available from Wednesday, and would be open to home movers as well as first-time buyers.
“We’ve been thoughtful about returning to 90 per cent LTV for two reasons — one was having capacity in the system with so much demand from customers, and two was the uncertain and volatile outlook for house prices,” Lloyd Cochrane, NatWest head of mortgages, told the Financial Times.
“The outlook in particular [now] seems to be a great deal more certain for customers. That together with capacity issues largely being resolved means we’re comfortable going back in.”
Last week Lloyds Banking Group, which also owns the Halifax brand, said it would start offering some 90 per cent loans, albeit with additional affordability criteria.
Yorkshire Building Society, the UK’s eighth largest mortgage lender, resumed 90 per cent lending late last month and last week said it would cut fees on the loans to further encourage borrowers.
NatWest and Lloyds initially predicted that the coronavirus pandemic would prompt a sharp decline in the housing market; under the most pessimistic scenario used by NatWest to predict loan losses after the second quarter, house prices would have fallen by an average of 11.5 per cent this year and almost 15 per cent in 2021.
However, demand has been propped up by a combination of a temporary stamp duty holiday, ultra-low interest rates and changing habits as experts predict a long-term shift towards remote working.
Mortgage approvals for home purchases hit their highest level since 2007 in October, according to Bank of England data, while figures from Nationwide Building Society showed average prices continued to rise despite the second national lockdown in November.
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