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Industry Insights Series Q2 2020
Catherine Alexander, Mortgage Adviser
Recent events have generated many questions around how COVID-19 will impact the mortgage market. With this in mind, we have prepared a Q&A on COVID-19 and your mortgage which covers the main areas that we think would be most helpful. If you have any additional questions or would like to talk to us about any of your concerns, please do contact us.
Can I still apply for a new mortgage or re-mortgage?
Yes you can. Banks and lenders are still taking applications for new mortgages and there is still a great deal of competition in the mortgage market. Understandably, people will worry that we are going to face the same problems as we did during the 2008 financial crisis, however the difference here is that there is no issue with the liquidity for banks and building societies. Rates remain low with the Bank of England Base Rate at its lowest for years, so now could be a prudent time to fix your mortgage rate. There is some variation however in how each lender is responding to the current situation, with some lenders being impacted more than others in terms of servicing their customers. Initially, we did see lenders having to withdraw some mortgage products or cap loan to values, this was to limit the amount of business they received so that they could ensure they could service their current customers and put a plan in place moving forwards. However, many lenders are now starting to reverse these restrictions.
Should I be worried about the housing market?
No-one can say exactly what impact the outbreak will have on the property market, but it is likely to mirror the rest of the economy. In the short-term, house price growth will stagnate, and price data may be volatile and unreliable due to reduced transactions going through (as in-person viewings cannot currently go ahead). It is possible that people will hold off putting their houses on the market until there is greater confidence around the financial situation. However, there will always be some people who still need to move for various reasons. The UK property market is very robust, so it is highly unlikely that prices will crash.
Will my mortgage application take longer than usual?
At the moment, mortgages are being processed at the usual speed in most cases. That being said, due to staff shortages there will be inevitable points at which lenders may go over their stated processing times. It may also be the case, depending on the property, that delays will be unavoidable if a physical valuation is required (in cases where a desktop or automated valuation is not possible). Therefore, if you are planning to make an application, we would recommend starting the process slightly earlier than you might have previously. Because we are in constant contact with the lenders, we are able to advise which ones have reduced timescales compared to others and we can therefore help do everything we can to help ensure your mortgage is completed within your timescales.
Would it be advisable to take out Income Protection or Accident, Sickness and Unemployment Cover (ASU) now?
At times like this the value of protection becomes evident. If you do not already have insurance to protect you should you be unable to work, it may be that taking out insurance now might be too late for the current situation. But it is worth thinking about insurance now while it is at the forefront of your mind so that it’s in place for the future. We highly recommend that you speak to an adviser to discuss the options available to you, you want insurance that fits your circumstances and to make sure that you are not paying for something you do not need or won't protect you for what you want it to - quite often people wrongly believe that ASU cover will protect them if they are made redundant for example. It is particularly important to look at any benefits that would be available to you, and if you are employed, to find out what insurances you may already have in place.
Can I take a mortgage payment holiday?
If you find that you are financially impacted by COVID-19 you can apply for a mortgage payment holiday with your lender. People who qualify will be eligible for a three-month mortgage payment holiday, for both residential and buy-to-let mortgages. It is important to remember that it is a deferral of interest rather than an option not to pay your mortgage, so if you can afford to pay your mortgage without the payment holiday you should do so. You do not want to use the payment holiday and then find that the facility is not available when you really need it. Additionally, the FCA have made it clear to lenders that they should ensure that taking a payment holiday will not have a negative impact on customer’s credit files, but please do check with your lender. As financial advisers we are always happy to speak to our clients about their options if you are considering taking a payment holiday.
What happens to my mortgage offer if it expires due to delays in completion?
Some lenders are extending the length of mortgage offers that have already been issued by a further three months. This allows extra time for completion to take place while moving home is difficult and follows government advice that moving home should be delayed where possible. This should be done automatically by the lender who will issue an updated mortgage offer document.
Are mortgage valuations still able to be carried out?
Physical valuations have been put on hold during this period of self-isolation. This means that where a physical valuation is required, they have been deferred until valuers are able to access properties again. However, wherever possible, lenders are using desktop or automated valuations which allows many mortgage applications to proceed to offer. Even if you do have to wait for a physical valuation, you will have locked in a low interest rate and completed most of the paperwork required so that only the valuation will be outstanding when you can proceed.
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