Mortgage Advice During The Covid-19 Pandemic - Part 7
Greg Cunnington, Director of Lender Relationships and New Homes at Alexander Hall casts his expert eye over how the Covid-19 pandemic is impacting mortgages and what the latest developments mean for you.
There is no doubt that the mortgage market is seeing fast paced updates right now. Helping our clients is key 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.
This week has been one of real change and improvements for the mortgage and property world. Updated government guidance has meant that the property market has been allowed to re-open, which was received with a great sense of relief for many of our clients and I am sure yourselves who were in the process of or about to look to purchase a new home.
This has also meant physical valuations can now take place once more for the mortgage surveys. We will look in this article to cover these updates, and how they impact your mortgage options.
Property market re-opens
As you no doubt will have seen in the press last Tuesday in a surprise announcement the government confirmed that physical viewings were allowed to go ahead under social distancing conditions in England.
This gave the green light for the housing market to re-open, as under new regulations, key activities relating to moving home will be permitted, allowing estate agents to get back to work. Previously, people were only allowed to move home where it was “reasonably necessary”, agents were banned from listing new properties and house hunters have only been able to make online viewings.
Mortgages for new build homes is an area we have been discussing with lenders, and in the last couple of weeks we have seen a greater number of new deals, including from some high street lenders, over the last week.
I am sure we will see further updates on this in the coming days and weeks, but the initial feedback from agents is that they have been very busy with new enquires from would-be buyers. This is no surprise, as we already saw a real uplift in first-time buyers and home movers pre lockdown this year so there is pent up demand remaining.
When you add into that the lockdown period making people reflect on their home space and requirements, with home offices and garden space in particular being seen as key, and you can see why people have been so pleased with these changes.
The process of course will not look the same. Buyers, renters, sellers and estate agents are likely to have to take extra precautions, including keeping 2 metres apart during viewings. The good news is that from a mortgage perspective intermediary firms like ourselves have adapted to the remote working scenario to ensure we are here to help with all of your mortgage requirements.
With limited stock on the market it is important that prospective buyers ensure they are ‘buyer ready’. As we have seen in the last few weeks mortgage lenders have varied their criteria and documentation requirements quite significantly in this period, so it is important you ensure you check your mortgage eligibility and what documents will be required as early in the process as possible.
The Covid-19 lockdown meant surveyors have not generally been able to physically inspect a property. In response to this, lenders have been adapting to undertaking a greater number of automated or “desktop valuations” (where a surveyor assesses the property remotely).
However, not all property types are eligible for these types of survey. This also meant most lenders had to withdraw mortgage products that require a 5% or 10% deposit, hitting the first-time buyer market particularly hard.
The good news is that since the government confirmation last week that physical viewings can go ahead once more, under social distancing conditions, we have seen lenders and surveyors work really hard to get physical valuations for mortgage applications up and running.
I have to give a big well done to HSBC and Accord Mortgages, as these lenders had physical valuations booked in within 24 hours of the announcement, which our clients were delighted with.
Lenders and surveyors must ensure they have the capacity and correct processes in place to ensure they and clients feel safe. As such, if you are remortgaging or selling your current property you should expect a call from the surveyor to discuss how the valuation will take place and ask a few questions to ensure it is safe to do so.
We anticipate that as more capacity for physical valuations comes into the market, lenders’ criteria will return closer to where it was pre lock down, and an increasing number of mortgage products will return. We have already seen Accord Mortgages and Coventry Building Society return to 85% lending within days of this announcement (i.e. you need a 15% deposit), and expect daily updates going forwards.
This stresses why it is so vital that you are speaking to a mortgage intermediary who will be able to keep you updated on these options, and can ensure you have the widest array of lenders available so that the best option for your circumstances will be found.
One consequence of the lockdown period has been that mortgage lenders have built up pipelines of open applications that require a physical valuation.
At most estimates this is around 60,000 valuations that need to be carried out in the UK just on existing pipeline applications! This will likely take around three to four weeks to be worked through. Most lenders are working through these based on when the application was submitted, so for new applications you should expect a delay on the valuation.
Again, using an intermediary means you will be speaking to somebody who will be able to have a good understanding of the delays for each lender. As such, if you urgently need a valuation to take place (it could be you a remortgaging and your current fixed rate ends very soon, or you have a life event that means you need to move ASAP) we can ensure that we help guide you through this and put the application with an appropriate lender.
As part of these series of articles we are hoping to answer as many of your questions as possible, as we know this is a worrying time and many of you are worried on the impact to your personal finances and mortgage.
Please ask any questions you can think of at the bottom of this article and I hope to answer as many as possible in future articles.
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.
A client has asked:
“Hi, we are in the process of remortgaging to fund an extension on our house. The mortgage offer has been accepted and survey completed and adequate before the lockdown. Our solicitor has informed us the hold up is a redemption statement from our existing lender. I don’t understand why this shouldn’t be easily completed. Any ideas?”
As we have mentioned in previous articles, lenders faced a real operational crisis at the beginning of the lockdown period. They were inundated with mortgage payment holiday requests and urgent completions they had to process, which meant that service levels in other parts of their operations inevitably suffered. We have also seen requests for redemption requests take longer than usual from lenders in this period.
If you used an intermediary they should have escalation contacts at your existing lender. As such, you should first make them aware of the situation and ask them to chase the lender on your behalf using their contacts. We have had quite a bit of success for our clients this way.
If you submitted the application directly with the lender, you should keep chasing them and ask your solicitor to do likewise. We have found that lenders are much closer to normality when it comes to service levels now, and as such you should find some joy. I hope this gets sorted for you quickly!
Another client has asked:
“I have got a mortgage agreed in principle for six months with my lender. I agreed to purchase a new build that was due to be ready in September, but due to Covid-19, building was suspended and the property may not be ready until December.
The estate agent wants a deposit of £29k but fear is the house won’t be ready in that six months, we may need nine months now as builders are not on site at the minute. Is there an extension for buyers like us or any help from UK Government. We have just paid £1,000 at this point to choose the house but deposit will be required soon.”
OK yes so it sounds like you have agreed and paid the reservation fee for this new build property, but are now being asked to exchange contracts. This would not only mean you have to pay what is normally a 10% deposit, but you are also legally committing to the purchase of the property.
The good news is that lenders are aware of this scenario, and are trying to assist where they can. Halifax is one of the largest lenders on new build in the country, so is taking a proactive approach here.
You should be able to get a six month extension on this mortgage offer. However, you will likely have to choose at that time from their updated rate options, and also may be asked to re supply proof of income. If you have any fears over your employment status this may not be the best option.
You should speak to your developer to see what timeframes are now being discussed, as a lot of developers are now back on sites. As such it could be that the completion should now still be comfortably within the six month window.
We are getting a lot of enquiries on new build, and Help to Buy, and hopefully last week’s article helps to answer some of these for you.
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.
Image: PA Images