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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.
