Mortgage advice during the Covid-19 pandemic - Part 2
In this new series of weekly articles, Greg Cunnington, Director of Lender Relationships and New Homes at Alexander Hall, looks to clarify how the mortgage market has been impacted by the Covid-19 pandemic, and what this means for you. In this second part to the new series, Greg looks at some of the developments in the last week and also answers some more of your questions.
There is no doubt the developments in the mortgage market in response to the coronavirus crisis are moving at a frenetic pace. Helping our clients is crucial for everyone in the industry currently, so we are keeping on top of all of these updates to help navigate the best options for your individual circumstances at this time.
Hopefully you found last week’s article with an overview in response to some of our clients most ‘asked about’ question useful. This week I have focused on some of the updates which have happened since my last article, and how these changes may impact you and your options.
Mortgage Payment Holidays
Most lenders are now set up to help you if you need to speak to them about a mortgage payment holiday.
We have seen some positive developments in the last week with lenders preparing online application forms for you.
This means you will escape being on hold for what could be up to three hours for some lenders. We had some clients tell us how frustrated they were at not being able to get in touch with their lender.
We have also seen most of the buy-to-let lenders now set up for payment holiday requests, with one of the largest in Barclays having built a system from scratch to help process these.
This helps to provide another option for landlords where your tenants cannot make their rent payments due to Covid-19 related financial problems.
One bit of advice we want to ensure clients are aware of and to stress is that by requesting a mortgage payment holiday, you are essentially saying you are in financial difficulty.
This could then affect your ability to acquire other mortgage options during this mortgage payment holiday period, both for a rate switch with the existing lender in some instances, or when looking to remortgage to a new lender.
This is why it is so important that you receive advice before looking to request a mortgage payment holiday, and have ensured it is the best option for your circumstances.
There is some more information on mortgage payment holidays in our recent article which you can find here.
Extension of Mortgage Offers for home movers
As covered last week, some lenders are extending the mortgage offers for home movers (and first-time buyers) by a further three months where parties have exchanged contracts.
We have seen this week some lenders look to introduce this for other clients that have not yet exchanged contracts.
Santander for example have implemented an automatic two-month extension for all clients with a purchase application that was submitted prior to 31 March and have not yet exchanged, a move which should be applauded.
We anticipate that other lenders may follow here, so if you have an application for a purchase underway I encourage you to speak to your intermediary to see if you may be eligible for an extension.
Although you may have seen some press articles on the number of mortgage products decreasing from the market, remortgage products are still freely available.
As such, this period represents a great opportunity for homeowners to save money on their mortgage with some of the great low rates currently available.
If your current mortgage rate is coming to an end, despite this Covid-19 scenario the lender would still hike your rate up to their standard variable if you do not look into your remortgage options. There are some great mortgage deals being offered by lenders currently.
A typical standard variable (SVR) – the lender’s default rate, which you pay at the end of your deal if you don’t remortgage – would be around 4%.
Meanwhile, fixed rates are available today from 1.29% for a two-year deal or from 1.44% for a five-year deal. For a £100,000 mortgage that could be a saving of up to £225 per calendar month, or £2,710 per year!
You may have seen some press reporting that surveyors are not considered ‘key workers’ and hence are not allowed to go out to visit and value properties (i.e. a “physical valuation”).
Therefore naturally, you may be concerned about whether you can apply for a remortgage during this time. We have been in continual discussions with lenders and the good news is that more and more lenders are now able to do some valuations for remortgages without the need for a home visit, using market data and knowledge of the location to estimate the value. An intermediary can help guide you on what lenders offer these types of valuations.
Mortgage applications for furloughed workers
If you have been furloughed and are currently on the government Job Retention Scheme, you may understandably be worried about how this may affect your ability to get a mortgage, if you are in the process of purchasing a home or looking to remortgage currently.
We have seen some of the major lenders clarify their position on this in recent days. NatWest and Nationwide have both confirmed that they will continue to accept mortgage applications from clients furloughed.
They will take the amount of income being received through the scheme and use this for their affordability assessment and to assess the maximum borrowing available. This is a positive move, and with two of the largest lenders confirming this position we anticipate others following in the coming days.
Again this is a fast-evolving situation as lenders adapt to the new realities created by the Covid-19 environment. So you should ensure you are working with an intermediary who will help you find the best option for your circumstances and who will be able to offer expert advice in these challenging times.
As part of these series of articles we are hoping to answer as many of your questions as possible. We know this is a worrying time and many of you are anxious about the impact to your personal finances and mortgage.
Please send your questions via the ‘comments’ section in this article or you can contact us directly at email@example.com or speak to your adviser directly.
We received lots of questions this week so apologies we could not answer them all. But we will have more in next week’s article and I hope to answer as many as possible in future.
Payment holiday on empty buy-to-let
“My tenants left at the start of March. I cannot get the property let unless I drop the price where it becomes impossible to cover costs. Can I apply for a mortgage payment holiday?”
Yes – mortgage payment holidays apply to buy-to-let mortgages as well as residential mortgages. As such, if you have difficulty in paying your buy-to-let mortgage due to being affected by, either directly or indirectly, COVID-19 then you can apply for a mortgage payment holiday on this mortgage.
Surveys cancelled: What will happen to my remortgage?
“I am/was in the process of remortgaging to a new bank to take advantage of a better deal but my application required a physical survey to be completed.
The survey has not been able to progress due to the lockdown and as a result my remortgage application is on hold. My current deal with my existing bank comes to an end in a couple of months after which I will revert to their standard variable rate (SVR) which is almost double what I am paying now.
Do you know if there is anything being done to support borrowers in this situation? Not knowing how long this is going on for, I feel like my only option rather than pay double even for a few months is to stick with my current lender even though their rate is higher.”
This is a really good question, and a scenario we have seen impact clients in the last couple of weeks also. The good news is, yes, there are other options here and solutions for you.
If the existing lender has stated they cannot progress until a physical valuation is possible, then the best option will be to look to consider applying with another lender. There are more lending options out there than people often realise.
As the valuation has not taken place, if you paid for a valuation fee this will be refundable. As you state you still have a couple of months until the remortgage is due, there is plenty of time to do this.
We would look at which lenders are doing automated or desktop valuations based on the circumstances of the applications, and advise on the best remortgage options for you with those lenders based on your requirements.
We would also look to see what new products your existing lender is offering as these should be quite quick to put in place. However, if you are releasing equity as part of the remortgage or looking to change the mortgage term the existing lender may not offer this, which is why a holistic overview of your requirements would be needed before we could know which would be the better option for you. But that is what we are here for!
This article was originally posted in What Mortgage online. You can see the original article here. Please note this will launch a new web page.