The UK’s biggest mortgage lender has pulled one of the country’s favourite deals as banks continue to tighten their lending ahead of fears of a downturn.
Halifax, part of Lloyds, has pulled its two-year fixed rate deals for remortgage customers, while introducing a range of new three-year deals.
Experts say the move is designed to help retain the bank’s ‘low-risk, high quality’ mortgage customers for longer by not allowing a two-year option.
Mortgage lenders are becoming increasingly conservative in who they lend to as fears develop over a the health of the economy and a second coronavirus spike.
Halifax has pulled its two-year fixed rate mortgage deals for customers looking to remortgage
Across the board some 811 two-year fixes have been cut since March this year, from 1,586 to 775, according to finance experts Moneyfacts.
These deals, along with five-year fixes, have traditionally been the nation’s preferred option when taking out a mortgage on a home.
Most of the two-year fixes that have faced the axe in past months have been high loan-to-value mortgages, which take longer to underwrite and lenders see as more risky in the current economic climate.
But it appears that Halifax has not pulled their two-year deals to limit higher risk lending but more so to retain the lower risk customers they already have for longer, brokers say.
Broker Private Finance’s Chris Sykes
The bank’s new three year deals for example at 60 per cent loan-to-value are extremely competitive at 1.17 per cent, marking a significant interest rate cut for this product type.
Broker Private Finance’s Chris Sykes told This is Money: ‘We believe it is a move to get extremely high quality, low risk business for the medium to long term to offset risks attached to their lending at 75 to 85 per cent loan-to-value.
‘Halifax are offering rock bottom rates for sub-60 per cent loan to value remortgages, in fact better rates than their two-year first time buyer or home mover range in this loan to value category.
‘This subset of borrowers is very low risk from a lender’s perspective offering a likely long positive credit history as well as low loan to value so if there are any house price drops they banks security is extremely safe.’
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Buyers who lenders see as more of a risk, particularly first-time buyers, are the group most seeing their choice of deal limited.
For example at the start of this month there were just 51 deals available to those with a 10 per cent deposit from 10 lenders, down from 772 before lockdown was implemented, according to Moneyfacts.
But buyers and those remortgaging with a large deposit or substantial equity already in their home can currently take advantage of some historically low rates.
Sykes added: ‘Lenders are already fighting for business in this low loan to value battleground, and often when one large lender introduces something quirky the others will follow.
Buyers with a large deposit can currently take advantage of some historically low rates
‘In the last few years most lenders will only have competitive two and five year fixed rates, perhaps this will get more lenders to introduce three year rates and maybe even given options of four year fixed rates, and why not?’
A Lloyds spokesperson said: ‘We are committed to supporting the mortgage market and we regularly review our product range to make sure we continue to offer a range of options and maintain service levels.
‘Fixed rate remortgage products are still available through Scottish Widows Bank, Halifax Intermediaries and BM Solutions.’