It’s now over 8 months since the coronavirus pandemic took hold of the UK and on 5th November we found ourselves in ‘lockdown 2.0’ – so what’s been the latest in the mortgage market?
Following the easing of restrictions on the housing market and the introduction of Stamp Duty changes in England and Land Transaction Tax across Scotland and Wales tax relief, the property market saw a surge in movers who had resumed their house move or, after assessing their living arrangements, were keen to make a move.
A key difference with lockdown 2.0, compared to the first lockdown earlier this year, is that the property market was allowed to remain open, enabling customers to progress their home moves.
However, numerous factors, such as Government intervention, lender influence and an economic hardship, have continued to see a shift in the mortgage market and have further highlighted the importance of obtaining professional mortgage advice during these uncertain and ever-changing times.
The Government announced lockdown 2.0 on Saturday 31st October and, recognising that few businesses will remain untouched by the pandemic, the furlough scheme for workers has been extended to the end of March 2021.
With employees across a range of sectors continuing to be impacted, mortgage lenders continue to wrestle with their approach and affordability criteria for affected applicants.
Some lenders are only accepting the reduced furlough salary as an income; while others are stipulating that more information is provided before calculating how much can be borrowed. Some lenders aren’t counting furloughed income at all in their affordability assessments. Applications from those receiving financial aid on the new tiering structures are likely to be impacted in a similar way.
If you're unsure, you should speak to your individual advisor and your lender about how a change in circumstances could impact your personal mortgage application.
Mortgage payment holidays
As part of lockdown 2.0 and the Government’s wider support, mortgage payment holidays were also extended until the end of March 2021 to help counteract the financial pinch during lockdown and give people the flexibility to either reduce monthly payments, or pause them completely for a period of time.
However, like any holiday, it must be paid back eventually and your lender may recalculate your repayment amounts or extend your mortgage term to cover the loan payable during the deferred period. If you feel that a mortgage payment holiday is something you may require, you should contact your mortgage lender to discuss the options available to you.
Reduced availability of low deposit mortgages
The Stamp Duty changes in England and Land Transaction Tax across Scotland and Wales have had a buoyant effect on the housing market, giving buyers the confidence to start looking again after putting their plans on hold. Nonetheless, with the deadline for completion of 31st March 2021 growing ever closer, every effort should be made to work closely with all parties involved in the process to ensure you are in the best possible place to meet the deadline.
Mortgage lenders continue to wrestle with balancing their risk exposure against supporting customers with providing loan deposit mortgages. Subsequently, we continue to see limited availability of loan deposit mortgages. We have seen a small increase in availability of 90% mortgages recently, some of which have been available on a limited time basis only. Encouragingly, for those customers with a 15% deposit, there are many 85% mortgages options available across some lenders. A larger deposit will be required for a greater chance of getting onto the property ladder.
In these uncertain times, and with the pace of change, if you are unsure about what options might be available to you, you should speak to a professional mortgage advisor.
As this situation is on-going and has never occurred before, there are no guidelines or takeaways from past occurrences to predict the outcome. This means there is a host of opinion on what house prices and mortgage rates will do over the course of the next few months and longer term.
A lot of the borrowing what-ifs will depend on the pandemic progression, political factors and the continuing impact on the economy, all of which is beyond our immediate control. However, with so much change to the mortgage market since the start of the pandemic, speaking to a professional to help you navigate through this uncertainty is more important than ever.