Criteria searches reflect disruption in equity release market – Knowledge Bank

The equity release market showed the most change across the categories recorded by Knowledge Bank in September, with ‘Maximum Loan Amount’ being the only consistent search in the top five results.

The criteria search specialist suggested that with limited high LTVs from mainstream lenders on the table for younger borrowers, many homeowners may be releasing equity in order to help younger family members get onto the property ladder.

In the residential market, ‘Temporary Maximum LTV Restrictions’ was again in the top five search results. Knowledge Bank highlighted that lenders are continuing to tighten criteria, demonstrating the impact that LTV restrictions are having on borrowers and their ability to buy or remortgage.

Residential market searches also saw ‘Income Multiple used for Affordability Assessment’ listed for the first time, signifying that people are worrying about their affordability, and Knowledge Bank highlighted that this won’t be helped by the ending of the furlough scheme at the end of October.

Knowledge Bank lender relationship manager, Matthew Corker, commented: “The overarching theme here is that people are needing to borrow more money at the very point that lenders are tightening criteria.

“The equity release market saw the highest levels of disruption in September, which is due to changing consumer habits as a direct result of COVID-19. The shortage of high LTV mortgages offered by lenders could well be leading to parents or relatives releasing equity to help younger family members get onto the ladder.

“As we look forward, with furlough coming to an end, we may see more searches for people that have defaults, like we are seeing in the second charge market now.”

The data indicated that people are using second charges to raise finance, with the top three searches being ‘Maximum LTV / Loan to Value,’ ‘Covid-19: Temporary Maximum LTV Restrictions,’ and ‘Defaults – Registered in the last 3 years.’ Knowledge Bank said this shows that second charge loans are being “predominantly used by people facing financial problems”.

The buy-to-let (BTL) category saw the most consistency during the month, with the top five searches remaining unchanged in September, and ‘First Time Landlord’ taking the top spot. The criteria search expert suggested that as lenders tighten their appetite for risk, first-time buyers or renters struggling to get onto the property ladder may consider buying BTL properties instead of their own home.

“We may also see more people buying property with elderly relatives to avoid putting them in care homes, and generations joining forces in order to get younger relatives onto the property ladder,” Corker added. “Perhaps intergenerational living could soon become the new normal.”

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