Mortgage Advice During The Covid-19 Pandemic
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.
In this fourth 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 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.
Hopefully you found our first articles useful. This week I have focused on some of the updates since that article, and how these may impact you and your options:
Lenders returning with more options
A report earlier this month showed that the number of mortgage products available more than halved since early March, from 20,279 to 8,193 according to data from technology provider Twenty7 Tec. This is mainly due to lenders having to remove higher loan to value mortgage products due to not being able to carry out physical valuations, as per current government guidelines.
However, the good news is that we are seeing lenders really looking to support clients in these challenging times. The last week has seen a variety of positive lender updates as they adapt to these ‘new norms’ and restrictions. In particular, lenders are beginning to adapt to using market data and knowledge of the location to carry out a valuation on a desktop or automated basis.
Highlights in the last week include HSBC confirming it will use desktop valuations to continue to lend with a 10% deposit or equity, while Halifax and Nationwide have both returned to lending with a 15% deposit or equity (from requiring 20% and 25% respectively).
Santander has increased its maximum loan amount for residential applications to £500,000 (from £350,000) and also has returned to buy-to-let lending with some competitive remortgage products.
We work very closely with all of the major lenders, and it has been great to see how quickly they have looked to improve criteria to help clients at this time.
What this highlights is that there are more mortgage options currently available than you may realise. Whether you are looking to remortgage as your existing initial rate period ends this year, or want to ensure you are ‘buyer ready’ and have your mortgage options discussed and lined up so that you can actively view properties once possible once more, the options are improving weekly.
Whatever your current circumstances, using an intermediary will ensure you get the expert advice and support you need and ensure you have somebody on top of these updates options for you.
I have applied for a mortgage and been furloughed – can I still get the mortgage?
This has come up from quite a few of our clients, and also from readers of these articles, so we thought it would be a good topic to address this week.
The reality is that 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.
The good news is that most of the major lenders have now confirmed their positions for these clients. Most will continue to accept mortgage applications, for both purchases and remortgages, for clients who have been furloughed. However, typically they will look to use 80% of the normal income for their affordability assessments of the new mortgage (to be in line with the income you will receive from the job retention scheme).
In a further positive move, some lenders have now confirmed that where the employer is topping up your income to 100% of your normal salary then this can all be taken into account for your mortgage application. Evidence of this additional income will be required.
Where your application has already been submitted the lender needs to be advised of your updated income position. They will then re underwrite based on the furloughed income. If the affordability still works on the updated income position then there will be no change to your application with the majority of lenders.
It may be that the lender can only offer you a reduced borrowing amount, assuming your income whilst furloughed is lower. You will need to reassess your position in this scenario and ensure if a purchase of this new loan amount will still be okay.
Once you return to work from furlough in the future we anticipate most lenders being flexible in accepting your updated normal income fairly quickly.
It should also be noted some lenders have taken a more defensive position. We have seen some lenders capping loan to values for clients working on a furlough basis, meaning you would need a larger deposit – potentially as much as a 40% deposit with some lenders – meaning there is a mixed bag of lender positions on this.
If you already have an application in with one of these lenders, which may mean they offer you a reduced loan amount based on the updated deposit requirements, all is not lost. As long as you are speaking to an intermediary who can access a large number of lenders they can ensure a new application can be submitted with a new lender with a more favourable position on furlough income.
Again this is a fast evolving piece 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 be able to 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, 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, or into What Mortgage directly, 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:
“Does taking a mortgage payment holiday affect my credit rating, and so my ability to remortgage in the future?”
The credit referencing agencies have guaranteed protection that for people taking a mortgage payment holiday in this period that will not affect your credit score. As such, it will have no negative bearing here.
However, 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. Some lenders have stated they will not accept a remortgage application from a client currently on a payment holiday.
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. An intermediary will be able to guide you through your individual options.
There is some more information on mortgage payment holidays and a Q&A in this section of the website.
Another client has asked:
“I’m currently trying to resume process of purchasing a flat and chose xxx as lender [name removed], but they just replied “are not taking any new business and just serving existing customers”
We have heard similar stories from clients. Unfortunately, as lenders have moved already depleted staff resources to manage urgent enquires such as mortgage payment holiday requests and completions that need to still take place, you may find they are struggling to put any resource into new applications.
The good news is that as I mentioned earlier in the article lenders are still very active with lots of options available. A good intermediary can access the key individuals at lenders, such as underwriters, to discuss your potential application and to get updates once submitted. As such we would be happy to help you find the best lender option for your circumstances here and assist 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.