The Coventry Building Society this week became the latest lender to dash the hopes of first-time buyers with small deposits. Although it said it was offering a 10 per cent deposit deal – it would only be for four days.

The list of other lenders who are no longer offering ‘first time buyer 10 per cent deposit deals’ has grown phenomenally since March. They include Clydesdale, Virgin Money and Accord. Pre-lockdown, first-time buyers could choose from 294 total 90 per cent loan to value deals with a fixed rate of two years. For a fixed rate of five years there were 137 deals on offer. By May there were only 24 and 11 deals respectively.

Only HSBC continues to offer 85 to 95 per cent deals – although these are ‘sold out’ after 30 minutes each morning. Nationwide continues to offer a 95 per cent deal (via its branches – not a broker).

The fear is that effectively shutting out first-time buyers will prevent the property market from bouncing back quickly post-lockdown.

Reasons for withdrawing the 90 per cent deposit deals were put down to the inability to provide physical valuations for properties. They also cited worries over negative equity in the event property prices didn’t pick up after lockdown. Reduced staff resources was also cited as a reason.

Some small business owners and self-employed individuals looking for a residential mortgage are being penalised for taking government help during the pandemic, it has emerged.

This is contrary to what the government promised back in April when it offered support to businesses via a 12-month interest-free Bounce Back loan or to furlough staff. Some brokers – and lenders – admit it is included in mortgage credit scoring.

This is despite the fact many business owners and self-employed individuals may simply have taken the support because it was there. Thousands will have used the furloughing help for solely childcare reasons, for instance.

Will other lenders follow Virgin Money’s example?

Virgin Money – which owns the Clydesdale and Yorkshire Building Society – was the first to declare, weeks ago, that it wasn’t taking mortgage applications from business owners and/or self-employed staff who were receiving Covid-19 government support. At least, it wasn’t including furloughed income.

Nationwide, Lloyds and TSB said they weren’t ruling out individuals who had used government support, which includes the Coronavirus Business Interruption Loan Scheme. But they said it would be considered as part of their overall financial situation.

Mortgage broker Chris Sykes warned lenders were “setting the bar very high.” He added: “Some are scrutinising how people’s businesses are performing during the pandemic but not taking all circumstances into account, and we’ve seen some very harsh decisions.”

Mortgage holidays bad news for self-employed

Broker Nick Morrey of John Charcol, said those self-employed individuals who had taken a mortgage holiday might find their mortgage credit scores affected. This is also despite government assurances this wasn’t the case.

He said: “I understand they [lenders] don’t want to lend to people who won’t be able to pay it back, but they are treating the self-employed very differently to other clients.”

As well as their personal finances, many self-employed business people looking for a residential mortgage (or to re-mortgage) are being asked to show details of their company accounts too. In April many lenders were asking small business owners to provide personal guarantees when applying for an emergency loan. This practice has since been banned.

Regional winners and losers as property prices plummet

As expected, property prices have plunged over the last month – according to the Nationwide House Price Index, published this week.

The fall – of 1.7 per cent – fits in with the reduction in property sales 54 per cent compared to the same time last year. But it’s not putting property analysts into a spin. Most are confident of a price rebound effect, with the damage proving short-to-medium term. Others aren’t so optimistic. Samuel Tombs, chief UK economist at Pantheon Macroeconomics predicts a continuing decline for the rest of the year – to a five per cent drop by January 2021.

Pantheon does, however, admit that Google searches for property mid-May was only 13 per cent less than it was pre-lockdown.

Leicester is best UK city to invest says Raisin Index

Meanwhile, another two Indexes we’ve been looking at recently have been attempting to pin-point the best locations to invest. Private company Raisin lists the top three area for UK property investment based on business survival and property price increases. The other Index, by the urban policy research unit Centre for Cities, looks at where Universal Credit claims spiked last month.

So, is Leicester really where property investors should be focusing on at this moment in time? According to successful Berlin-based fintech company Raisin they should. The 2014 start-up – which refers to itself as a pan-European marketplace for savings and investment products – also encourages commercial investors to consider the city.

The company bases its findings on their recently commissioned report, the Raisin UK city investment index. The results showed 91 per cent of businesses in Leicester are still performing after two years. At the same time, property prices there have risen by more than a quarter, at 28.3 per cent (£69,000). It brings the price of an average price of a property to £246,000 – up from £176,382 in 2018.

Coventry and Bristol took second and third place in the Index respectively. Their scores for business survival were 90.6 per cent and 88.7 per cent. House prices in each city had increased by 28 per cent (Coventry) and 26 per cent (Bristol).

Avoid investing in Blackpool, Hull and Liverpool

Meanwhile, areas to avoid buy-to-let investments right now, according to a Centre for Cities Index, is the North of England. That’s because claims for Universal Credit there are the highest in the country. Blackpool saw the biggest jump in claims in April – an increase of 3.4 per cent from 11,650 individuals (or 8.9 per cent of the population). Other big increases came from those who are also now jobless as a result of coronavirus, in cities such as Hull, Liverpool and Manchester.

The increase in unemployment numbers in the North is no doubt already causing landlords anguish since, simultaneously, more landlords have mortgages on their property than in other regions of the UK. Research by estate agency Hamptons showed 67 per cent of landlords who invested within the past three years were mortgaged. The figure for neighbouring North West was only 2 per cent lower and in Yorkshire it was 60 per cent. The national average for landlords with mortgages on buy-to-let properties is 54 per cent.