Covid-19 has sent the global economy into turmoil which has impacted the UK housing and mortgage market. Thankfully, the change of stance to “Stay alert” by our Government has allowed the housing market to function again.
Here at AGA Mortgages it’s still business as usual in terms of supporting and advising our clients. Never before has it been more important to get specialist mortgage and insurance advice.
Latest developments as of 22nd May 2020
Coronavirus (Covid-19) – The onset of this had placed the housing and mortgage market into turmoil. The Governments change of stance from “Stay at home” to “Stay alert has allowed estate agents to open again and viewings can go ahead. Also, surveyors can now carry out inspections where a physical survey is required.
Payment holidays – In light of the economy being on hold, many lenders have offered payment holidays and still are. You will need to contact your existing lender to take advantage of this but we would suggest only making use of this out of necessity. Too many people have been told this is a “free holiday” which is incorrect. You are simply deferring your payments and adding this extra interest onto your mortgage. When you resume your payments, the mortgage debt will have grown to incorporate the interest accrued whilst on the payment holiday and your payments will increase accordingly. The scheme is being extended and full details are on our news section which can be found here.
Purchase transactions – The Government advice had been to delay exchanging contracts if you can due to social distancing rules. As of 13th May, completions can take place and removal companies are allowed to resume business. If you have already exchanged contracts and are awaiting completion such as a new build property still to be built, we are witnessing mortgage lenders extending mortgage offers from the usual 6 months to 9 months.
Housing market – With the market largely frozen for the last two months and buyer enquiries down and a large recession looming, it will prove a challenging time for the housing market and there is a huge backlog of purchase business for the industry to manage. Physical surveys can now take place and we are witnessing the backlog of surveys from the last 2 months now being processed by lenders. Most lenders are advising us that physical surveys are now taken place whilst adhering to social distancing rules and common sense.
Remortgages – If you have an existing mortgage and your current deal expires in the next 6 months it would be wise to review your mortgage now. As the industry gets back on its feet, there will undoubtedly be bottlenecks along the way. Many lenders have adapted well and we can source lenders that can handle a remortgage efficiently which coupled with a reliable solicitor can help ensure your remortgage can be processed smoothly. Many lenders now use an AVM – Automated Valuation Model. This allows them to establish the approx. value of your home without the need to enter it. In many instances though a physical survey is required and the backlog for a physical survey is huge, but hopefully this will ease over the forthcoming weeks.
Mortgage lender reaction – Many lenders are now reluctant to use variable components of income such as commission and overtime. Lenders are also only using furloughed income should an applicant have been furloughed. As more people return to work, lenders will eventually start to asses people’s income in the normal way by making reference to their latest wage slips. It will take a skilled mortgage broker to understand your needs and present your case to a mortgage lender. We are in constant touch with key industry figures and lenders so please contact us today should you need advice in these uncertain times.
Insurances – Despite these uncertain times, insurance companies in general are still offering their suite of mortgage related insurances such as life cover, critical illness cover and income protection plans. For those that are displaying Coronavirus like symptoms or are self isolating, they will struggle to get cover but otherwise we are observing the insurance market trying to function as normal. We are getting continual updates from our key providers and contacts within the insurance world and we are specialists in this arena too. Click here for our dedicated insurance section.
Business as usual – We are a team of 4 mortgage brokers who operate from home with access to the latest technology meaning we can still advise and arrange mortgages for our clients without the need to meet you in person. Please feel free to get in touch and we shall guide you through this minefield.
Facebook – We shall endeavour to keep this page relevant and our Facebook page will also contain more specific information coming out from lenders and the industry as it happens. Please can you like and share our Facebook page especially if you have family and friends who you think would benefit from reading this.
Government updates – Another good place for information about Coronavirus is www.gov.uk/coronavirus
Key lender updates as of 22nd May 2020 – Some lenders have withdrawn from lending but this has tended to be the more specialist lenders as opposed to mainstream. Given that surveyors are now allowed to carry out physical valuations, we await lenders confirming that the surveyors they use for mortgage valuations have updated their procedures and safety guidelines to conduct business.
Halifax – After initially reducing their maximum exposure levels to 60% LTV (loan to value) they are now offering upto 85% of a property value for a purchase or remortgage and seem to offering more competitive rates again.
Santander – They are now launching 85% LTV deals and have now announced 75% LTV Help to Buy deals. Their maximum loan size has increased as of 19yh May to £1,000,000 after being capped at £500k during the full lockdown.
HSBC – They are still lending up to 90% LTV but if they can’t determine the property value without doing a physical inspection, your transaction will be placed on hold till the lockdown ends. Where an applicant has been furloughed by their employer, HSBC will assess affordability based on 80 per cent of basic income up to a maximum of £30,000 per year gross. Bonus, commission and overtime will no longer be an eligible source of income with the exception of NHS employees where variable pay/overtime will be acceptable based on pre-March 2020 levels.
Natwest – They have reduced their maximum LTV to 80% on both Purchase and Remortgage applications. They are continuing to use all components of an applicants income although if furloughed, they will now seek evidence of the new income.
Nationwide – They had initially paused lending over 75% LTV on new customer purchases, remortgages and first time buyer purchases but from today, they are back to 85% LTV. They also announced 1st April that they will only be using basic income only so bonuses, commission and overtime can no longer be considered. This will be a temporary measure but we suspect it come remain in force for a brief period post lockdown whilst the economy thaws. One positive has seen the re-introduction by Nationwide of offering interest only mortgages on their remortgage range upto 60% LTV.
Barclays – As of 19th May they are finally reintroducing lending across their product range to 75% LTV as well as reinstating Help to Buy products. Annual and Quarterly bonus will continue to be used for income multiples but the proportion that will be used to support affordability will be reduced to 25%.
BM Solutions – One of the biggest lenders in the buy to let sector has announced they will be back lending to 75% LTV from 29th April. This also includes let to buy which is whereby your existing main residence is let out to become a buy to let property. Commonly used when a chain collapses and might prove crucial again in these uncertain times.
Other lenders – We are gradually seeing lenders returning to the market now that physical surveys are permitted. Once the backlog of valuations has been completed, lenders will return to lending at 90% LTV. Some of have already started lending at 90% LTV again including Accord Mortgages and Ipswich BS. We have been advised that Virgin Money will resume shortly and we envisage the mainstream lenders returning soon too.
Service levels amongst mortgage lenders as of 22nd May is mixed. Some lenders such as Barclays are taking an eternity to assess applications and others such as Bank of Ireland seem to be processing cases through to mortgage offer in less than 2 weeks. Many cases are getting delayed if a physical survey is required and in many instances, it’s only by making an application that the lender advises on whether a physical survey will be necessary. Lenders are hoping to have the physical survey backlog resolved by early June and we suspect that lenders will then return to offering deals based on a 5-10% deposit. If your mortgage needs reviewing within the next six months, we would urge you to get in contact ASAP.