Whether it’s the 3-month payment holidays, how they deal with furloughed workers or how to get an offer extended, mortgage lenders and how they are dealing with the current environment is the main topic of discussion at the moment.
This was clear as I took part in another mortgage hour session with the wonderful Clive Bull on LBC Radio on Sunday, answering callers’ questions that came in thick and fast. It seems that there is a real thirst for knowledge around mortgages and the property buying process like never before.
What really struck me is not just the fact that people obviously need and value professional advice, but how many people still wanted to get on with their transactions, whether that be selling, buying or remortgaging.
Whether they were still working or furloughed, their home move was still very high on their agenda which bodes well for the future when we start to see an easing of the current restrictions.
As to when this will be, we are still none the wiser, but there may well be some activity by the second week of May, with some builders and estate agents expecting to be allowed back by then.
Amidst all the craziness however, there seems to be some sense of a pattern emerging as mortgage lenders adjust to the current circumstances.
Mortgage Lenders Retreat
A couple of weeks back we saw mortgage lenders retreat and withdraw over half of the available products on the market, running to the sanctuary of 60% Loan-to-Value rates and below. Many specialist mortgage lenders withdrew from the market altogether as they tried to deal with the scale of calls coming in asking for 3-month payment holidays amidst a massively shrinking workforce as call-centres across the globe were forced to close.
There were some histrionic headlines at the time and a worry that we were about to experience another scenario similar to 2008, but these are very different times. The issues this time are very, very different – this is not about risk, bad banks or greed – this is about capacity and people.
Thankfully, our banking institutions are strong, well run and well capitalised. They want to lend but had to curtail things because they just don’t have the staff. The staff they had were trying to deal with literally thousands of calls a day from worried people asking about a three-month payment holiday.
Mortgage Lenders Return
Over the past two weeks, we have seen mortgage lenders come back into the markets, relying on mortgage brokers even more than usual. Some have come back to 75% or 85% Loan-to-Value, whilst others introduced a fund booking system to limit the number of mortgages that can be done each day.
All mortgage lenders have been working hard to get to grips with the current situation and have done a cracking job in most cases. Last week was a particularly positive one with the likes of Halifax, Santander, Barclays and Nationwide increasing the number of products available once more up to higher Loan-to-Values and higher loan sizes.
They are all utilising automated valuations where they can which are helping the process no end.
We have also seen the return to lending of specialist lenders such as Precise and One Savings Bank which is a massive boon for everyone. Specialist lenders are an essential part of the mortgage market and need to be looked after to help those borrowers who are underserved by the mainstream players.
Other mortgage lenders have managed to keep products available at higher Loan-to-Values and all mortgage lenders have continued to offer some competitive Product Transfer rates which brokers are able to arrange swiftly and easily for those borrowers coming to the end of their current product term.
I salute lenders for how they have started to deal with this so quickly. They have showed that, when they need to do something right like this, they do it.
The key issue is still around valuations, as surveyors have been grounded and no physical inspections can be done. Again, mortgage lenders have been pretty good in upping their Automated Valuation Models, (AVM’s) and so we are seeing more applications start to move once more.
There is still gridlock in some parts of the process because of this, but every broker will know which mortgage lenders are able to move through the process and which ones will have to pause at valuation stage.
There is also the big question around values themselves and you can expect that valuations will err on the side of caution for a while.
What happens to house prices themselves remains to be seen, but I still cannot see a wholesale drop in prices across the board. The fundamentals of why people move remain strong and you can bet that having stared at the same 4 walls in lockdown for months, there will be a good many people keen for new surroundings.
Add in the general lack of new properties in the UK and any dip in prices, potentially around 5%-10%, is likely to be short-lived.
Furloughed Workers & Self-Employed
Lenders have also been working on their policies to deal with the new wave of furloughed workers. Most of them will be able to continue to lend, however they will restrict the income they consider to 80% of your annual income up to the maximum of £2,500 per month.
Some lenders will also take into account any top-up on this that your employer is making, subject to proof from the employer.
The points to watch are around additional questions that lenders are asking. Some, like Barclays for instance, are sending out an additional questionnaire that confirms your circumstances have not changed since application. If you have been furloughed or your income changed then you do have a duty to disclose this to the lender, even after you have an offer. The lender can then choose to reassess the application and may change or withdraw the offer.
Others are just asking questions about whether or not you have been affected or likely to be affected by Covid-19 and for the Self-employed, applicants are now being asked to provide business bank statements and show that your business is likely to continue to trade at similar levels to the past.
In short, it’s a lot less of an exact science and more a question of the underwriter’s discretion. It really pays in these circumstances to use the skills of a broker who knows each lenders policy.
Stuck in the process? What about Offer Extensions?
There are a lot of people now languishing in No-man’s-land waiting to see whether their purchase will go ahead and worried about their mortgage offer expiring.
The good news is that most lenders will be able to offer a three-month extension on your offer. Just give them a call or speak to your friendly broker and they can arrange this. Do bear in mind however that some lenders will ask you to confirm that your situation has not changed or that you have been furloughed as discussed above.
Buy to let products have also started to reappear, still at historically low rates, and it is interesting to see many landlords are tentatively coming out to play once more to see what opportunities are out there. Some with large portfolios are looking to take advantage of low rates and see if they can release some cash to take advantage of anything that comes their way.
At Coreco we have an experienced team that are used to dealing with landlords and large property portfolios, so it is worth getting in touch with us for a free review.
Mortgage Market Still Very Much Open
In summary, despite a blip a few weeks ago, mortgage lenders are dealing with this admirably. The market is still very much open, lenders still have money to lend and more importantly, they want to lend.
Whilst they do have some concern, understandably, about their borrower’s circumstances and ongoing affordability, for the most part they are asking sensible questions and helping borrowers as much as they can.
With rates still very low and very unlikely to move North anytime soon, remortgage applications continue to be strong and it remains a great time to lock into a good rate.
As many of us continue to stare at the same 4 walls day in and day out, it will be interesting to see if there is a sudden rush of people deciding to move when we start to come out of this, or choosing to move to a brand new area with more space as they now have more flexibility to work from home and do less commuting.
Best Mortgage Rates
In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 1.19%, (3.18% APRC) and 5-year fixes from 1.41%, (2.66% APRC) whilst variable tracker rates are around from 1.39%, (4.08% APRC).
Those looking at Buy-To-Let can now obtain products from 1.19%, (4.55% APRC) for 2-year fixed or 5-year fixes are available from 1.62% (3.77% APRC).
Our professional, friendly advisers are still available for you to get some down-to-earth advice, or even just to have a chat! Contact us now on 020 7220 5110 or click here.