Industry Insights: COVID-19 and your mortgage

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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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Industry Insights: The importance of a long-term view

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Industry Insights Series Q2 2020
Joseph Middleton, Financial Adviser

If you had asked me last year what I was hoping for in 2020 that would help provide some certainty for the economy (particularly the UK), it would have been for some clarity on how the Brexit deadlock would be resolved. Time swiftly moves on and I am sure Brexit is well down the list of worries many of us have now. The coronavirus pandemic has shut down large swathes of the global economy and understandably this has resulted in a big correction in asset values. In the next few years, I suspect the world will start to return to normal and there will be a new concern in markets, although I hope nothing quite as frightening to people’s health as COVID-19. As financial advisers it is our job to help navigate these uncertain times, whilst trying to give you clarity and reassurance with your finances. 

What can be done to protect yourself from these economic shocks and short-term uncertainty?  

One of the most important ways you can do this is taking a long-term view on your investments and financial planning. This is the key attitude we take when building portfolios for our clients. The first step to a long-term view is to understand your main financial goals. This could be something such as, saving for you retirement or securing an inheritance for you children (there are of course many others). After this you should be speaking to your financial adviser in order to set a plan in motion. Once this is the case, you and your adviser will have a strategy in place that will be tailored especially to your financial needs and goals. During times of ‘crisis’ it can be tempting to diverge from your objectives but doing this will often cause more harm than good. Of course, as part of your long term plan there should be provisions for the short term, that’s why we always encourage our clients to have an ‘emergency fund’ available to them that helps protect them over the short term if necessary.  

Economic uncertainty can come in many forms be it at a worldwide, national or personal level. The coronavirus pandemic hits hard because it covers all three. However, clients should take comfort in their long-term financial strategies because no matter how bad it seems at the time, the economy and the world will always move forwards. 

If you have any questions for us or to discuss any aspect of your financial planning, please do not hesitate to contact  the GDA Team.


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Industry Insights: Investing in Challenging Times

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Industry Insights Series Q2 2020
Gerry Caley, Senior Partner

Over the years I have listened to numerous economists, investment experts, research analysts and world-renowned authors discussing everything that has affected the markets over the last 300 years or so. Until recently however, not one of them had mentioned a little-known place called Wuhan in China. Our latest enemy, Covid-19, has not just attacked a particular country or people, but spread around the world in what could easily have been the plot to a science fiction story.

On this occasion, I would say that the jury is still out on whether we have collectively done enough to combat this outbreak, a topic that will certainly be debated on Question Time for the foreseeable future.  Meanwhile, as financial advisers we have an important job to do – advising and guiding our clients through this latest mire with our knowledge of the financial services industry and expertise. Saying that,  I must admit that I have never wished to be an 'expert' on anything, having been told by a learned colleague many years ago that an 'ex' is a 'has been' and a 'spurt' is a drip under pressure!

Many clients ask us what they should do when something catastrophic affects the markets and consequently negatively affects their portfolio fund values. Generally, I would say to do nothing initially. I know that this runs contrary to the instinctive response to cut any further losses, but by waiting until the dust settles you are able to make informed decisions that will benefit your investments’ performance over the longer term. Of course, it may be that your particular circumstances mean that a different approach is needed, and I would always recommend giving your financial adviser a call to talk through all the options available.

It is important to remember that whatever your portfolio value is showing (especially at times like this), it is only a paper loss or gain until something is sold. If you panic and sell prematurely, you will most likely create a real loss. You should keep in mind that investments are real asset backed securities – investing is not like betting on a horse, whereby if the horse falls or fails to make the winning post you will definitely lose your money. Markets do recover, whatever the cause of their distortion, be it short or long term.

If you have any questions for us or to discuss any aspect of your financial planning, please do not hesitate to contact the GDA Team.

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COVID-19 Challenges: Help with Financial Commitments

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Everyone goes through challenging times in their lives and sometimes you can be overwhelmed by your financial commitments. There is the potential for this to be the case for some people in light of the recent outbreak of Coronavirus (COVID-19), but this also applies for any unexpected life event such as illness, unemployment and bereavement - to name a few examples.

If you do find yourself in financial difficulty for any reason, there are steps you can take to ease the pressure in the short to medium term.

In terms of mortgage payments please contact your mortgage lender and explain your situation. The majority of lenders have excellent processes in place that will allow you to freeze your mortgage payments for a specific period (payment holidays), this avoids defaults being registered on your credit report and further potential action. Please do take advantage of this help that is available to ease the pressure on yourself and avoid debt problems further down the line which will be more difficult to resolve.

This advice also stands for any loans or credit cards that you may be paying (as well as household bills), just give your creditor a call and speak to one of their support staff who will be able to direct you to the appropriate team. You can often freeze or reduce payments and therefore give yourself the extra bit of breathing space you need.

As financial advisers we are always available to talk through the needs and circumstances of our clients. We offer practical advice to ensure that your money is working in the best way for you, and you have the right products to protect you and your family.

Additional Information 

Coronavirus (COVID-19) - Offical NHS Guidance:
https://www.nhs.uk/conditions/coronavirus-covid-19/


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A Battle of Wills - Don't leave it too late to makes yours

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It is easy to assume that our property and possessions will automatically go to loved ones when we die, but unfortunately this is not always the case. Many of us are unaware of the unintended consequences for our families by not having a valid Will in place.

If you die without having a valid Will in place this is also known as dying intestate, and there are strict inheritance rules which will be applied in this eventuality called the Laws of Intestacy. In these cases the court will appoint administrators who will be in charge of gathering your assets and paying any debts before distributing the remaining estate according to the rules.

The laws of intestacy vary greatly depending on whether you were single or married, or had children. In most cases, your property is distributed in split shares to your heirs, which could include your surviving spouse, siblings, aunts and uncles, nieces, nephews, and distant relatives. However, issues can arise for example in unmarried couples or families with step children as the rules do not recognise them as relatives of the deceased. Also, when no relatives can be found, the entire estate goes to the state. The only way to make it absolutely clear who should inherit your property and possessions after you pass away is by making a Will.

Since estate planning can be quite complicated, it may be wise to speak with an estate planning professional who can help you draft a valid Will and give you some peace of mind. If you have any questions or would like to speak to us further about making a Will, please do contact us and we will be happy to help.

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Mortgage rates are on the up

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Mortgage rates are likely to rise again after the latest comments from the Bank of England, a rise in the Bank's base rate from 0.5% to 0.75% is likely in May, with another rise expected to follow in the Autumn. In addition to this, two government schemes that currently offer lenders access to cheap funding are due to end this year and the Association of Mortgage Intermediaries agree that these schemes have helped keep rates low in recent years.

In terms of interest rate rises, borrowers with variable rate mortgages or a tracker rate mortgages will be most affected as the monthly payment amount will increase. Those with fixed rate mortgages would not see an immediate rise in their monthly payments however, when such borrowers reach the end of their term, they may find they have to make higher monthly payments. That said, depending on when they took out their loan, they could end up on a cheaper deal due to the competitiveness of the fixed rate market.

In terms of the Funding for Lending Scheme and the Term Funding Scheme which were introduced by the government, most mortgage experts do not think that there will be an instant effect on mortgage rates due to the way the schemes are structured, but we may see rates gradually drift upwards. Of course, there is always the option for the government to extend one or both schemes as it has done previously if they perceive it is beneficial to do so.

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Online Investment Fraud - Keeping Yourself Safe

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If it sounds too good to be true, then it probably is. 

The Financial Conduct Authority (FCA) is warning the public about the increased threat of online investment fraud, particularly those offering investments in binary options, contracts for difference, forex and cryptocurrencies. These fraudsters are targeting the public online and via social media, so while potential scam victims have historically been the over 55's, the FCA's latest ScamSmart campaign found that those aged under 25 were six times more likely to trust an investment offer they received via social media. This shift in methodology by fraudsters comes as people have become more sceptical of cold calls and more people are online than ever before.

The websites and profiles that are used appear highly professional and can feature fake customer reviews, logos and statements. Prices on these types of fraudulent media are often fixed, tie people in with extreme pay-out clauses or do not place trades at all - once money has been handed over the fraudsters disappear leaving the investor with nothing.

Some of the warning signs that an investment opportunity may be a scam include:

• The promise of  'quick wins', guaranteed or high returns.
• Downplaying the risks associated with investing.
• Applying pressure to make a decision quickly, e.g. short availability periods.
• The offer of additional bonuses or discounts.

The FCA encourage the public to check its dedicated website www.fca.org.uk/scamsmart when considering any investment opportunity, and at the very least:

1. Reject unsolicited investment offers whether made online, via social media or over the phone.
2. Check the FCA Register to see if the firm or individual you are dealing with is authorised and check the FCA Warning List of firms to avoid.
3. Get impartial advice before investing.

Getting impartial advice before making any investment decisions is invaluable, and most financial advisers will be happy to discuss your investment needs at an initial meeting at no cost to the client. Personal recommendations from friends and family is a good way of finding an adviser, you can also find more information about finding a suitable adviser through the Money Advice Service. Ensuring that the individual or firm is authorised by the FCA also affords access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.

The FCA have very good instructions on their website regarding the use of the FCA Register and Warning list, in particular you need to ensure that you:

• Always access the Register from their website, rather than through links in emails or on the website of a firm offering you an investment. 
• Check if the firm’s ‘firm reference number’ (FRN) and contact details are the same as on their Register.
• If there are no contact details on the Register or if the firm claims they’re out of date, call the FCA Consumer Helpline on 0800 111 6768.

If you suspect an investment scam the best thing you can do is hang up on any unsolicited cold-caller, delete the email or ignore the advert. You should also report it to the FCA at www.fca.org.uk/scamsmart or call them directly on 0800 111 6768, this will allow any potential scams to be investigated and added to the warning list. They will also be able to advise you on what to do next if you believe you have already been the victim of an investment scam, by speaking to your bank or investment provider (if you are transferring an investment, i.e. a pension) it may be possible to stop a transaction going through.

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