In this series of weekly articles, Greg Cunnington, director of lender relationships and new homes at Alexander Hall, looks to clarify how the mortgage market has been impacted by the Covid-19 pandemic, and what this means for you. In this latest part to the new series, Greg looks at some of the developments in the last two weeks and also answers some more of your questions.
Since our last article there has been real change and improvements for the mortgage and property world.
Updated government guidance has meant that the property market has been allowed to re-open, which was received with a great sense of relief for many of our clients and I am sure yourselves who were in the process of or about to look to purchase a new home.
This has also meant physical valuations can now take place once more for the mortgage surveys. We will look in this article to cover these updates, and how they impact your mortgage options.
Return of high loan-to-value mortgages
The good news is that since the confirmation that physical viewings can go ahead once more, under social distancing conditions, we have seen lenders and surveyors work really hard to get physical valuations for mortgage applications up and running.
This in turn has led to some criteria enhancements from lenders that will hopefully benefit a lot of you. In particular at higher loan-to-value lending (where a client has a smaller deposit amount as a percentage of the purchase price), lenders will typically require a physical valuation to take place.
We have seen several lenders return to lending to clients with a 10% deposit, which is a big boost for first-time buyers in particular. Accord Mortgages (part of the Yorkshire Building Society Group), Virgin Money, Clydesdale Bank and Furness Building Society have all returned to lending in this space.
HSBC continued offering mortgages to clients with a 10% deposit throughout the lockdown period, using desktop valuations where possible, and are still lending here. This has been a great support to clients and so a big thank you to them from us all in the mortgage world.
As lenders work through their valuation pipelines we expect to see more lenders and options return for clients with lower deposits. The income multiples offered, and maximum loan amounts available, from these lenders varies massively depending on your scenario.
As such, it is vital if you are thinking of purchasing this year with a 5% or 10% deposit you get in touch with an intermediary with access to as many lenders as possible to ensure you are set up with the best option for your scenario.
New build
Many lenders had to either leave the new build market, or could only accept applications on the basis no valuation could take place, so in effect they were on hold during the initial lockdown period. This was obviously quite frustrating for those that had found their dream new build property.
As discussed in these articles some lenders introduced desktop valuations on new build properties, meaning they could proceed with valuations without the need for a physical inspection. Nationwide, Santander, Barclays and Bank of Ireland all showed great innovation here. However, this still meant new build mortgage options were limited compared to the pre-Covid options.
The good news now is that with the return of physical valuations we are seeing more and more lenders return to the new build market. In the last two weeks Skipton has returned to lend to clients with a 15% deposit on new build and Santander is back to its pre-Covid position and lending with a 15% deposit on a house or 20% on a flat.
Platform (part of the Co-operative Bank), has returned to new build lending with a 20% deposit and other major lenders in this space such as Halifax, Nationwide, Barclays, HSBC and NatWest are all lending on new build once more also.
An intermediary will be able to help you navigate through these newly enhanced options, so if you are looking at a new build purchase please get in touch.
Help to Buy scheme
This still means typically you need a slightly higher deposit currently for a new build property. We have however seen options for Help to Buy improve. With the Help to Buy scheme you can purchase a new build property with a 5% deposit, thanks to the support of the government backed equity loan.
We have seen lenders reduce Help to Buy mortgage rates this week, making them even more attractive. A good intermediary will also help you with the Help to Buy calculations and application, so please get in touch if this is something you are looking into.
Please see our article on
for more information
Self-employed mortgages
We have been receiving a lot of client enquires from self-employed clients, worried about their current mortgage options. The good news is that all major lenders remain open for self-employed applicants, meaning we can help with your mortgage enquires as always.
What we are seeing is that most lenders will now look at self-employed applications in more detail. Some lenders are now requesting the latest three months business bank statements for all new self-employed applications.
These applications will then be manually assessed by an underwriter, with the lenders wanting to see the income has not been negatively impacted if you are looking to use the latest available annual income figures to support the mortgage borrowing.
A good intermediary will be able to help guide you through these documentation requirements, and can also speak to the underwriters at the lender pre application to get a good idea if your scenario would fit their current criteria.
Mortgage payment holidays
The government has confirmed that the application period for a mortgage holiday will be extended until 31 October so customers who have not yet requested a holiday and are experiencing financial difficulty would be able to ask for one up to this date.
The Financial Conduct Authority (FCA) has also confirmed that for those on a payment holiday you can request an extension for a further three months. Lenders will take different approaches to how they assess these requests, but it is expected they will contact you to discuss your circumstances.
These updates are very welcome as they offer needed support for clients in financial hardship.
One bit of advice I mentioned last week – and I want to reiterate – is that clients should be aware that by requesting a mortgage payment holiday, you are essentially saying you are in financial difficulty.
This could then affect your ability to acquire other mortgage options during this mortgage payment holiday period, either when looking to remortgage to a new lender or for a new purchase application. You also incur interest on the payment holiday period, meaning in most circumstances you will pay slightly more over the lifetime of the mortgage.
This is why it is so important that you receive advice before looking to request a mortgage payment holiday, and have ensured it is the best option for your circumstances. We can also help you to look at if coming off a payment holiday is the best option for you.
There is some more information on mortgage payment holidays in this section of the website.
Client Q&As
As part of these series of articles we are hoping to answer as many of your questions as possible, as we know this is a worrying time and many of you are worried on the impact to your personal finances and mortgage.
Please ask any questions you can think of at the bottom of this article and I hope to answer as many as possible in future articles.
We received lots of questions this week so apologies we could not answer them all, but we will have more in next week’s article.
A client has asked:
“I have a mortgage agreement in place however it expires in July and I am purchasing a new build that now won’t be ready until August, therefore I need to get an extension. The lender has requested my pay slip and bank statement. The problem is I was furloughed for three weeks but returned to work full time again last week. Furlough does appear on my pay slip, will this affect me getting an extension?"
My response:
It sounds like you most likely in fact already have a mortgage offer in place. Lenders are being flexible to help with offer extensions on new build properties where completion has been delayed due to the Cov-19 situation, which has been good to see.
The lender will have to assess based on your updated circumstances. The good news is the majority of lenders are accepting client’s income who are furloughed. Where you are receiving 80% of your current income, they will take this reduced figure into account so clients in this position will need to check this is sufficient for the loan amount you require. If you used an intermediary, they can do this for you.
If your employer is topping up your furlough income so that you are receiving your normal salary, then some lenders will accept this higher income figure also as long as this can easily be evidenced.
The good news for yourself is that as you have returned to work as long as your employer can confirm this for you in writing we have seen lenders accept the normal higher income figure based on this.
Some may also ask for your first payslip showing the return to work income figure. As such, you should be fine here for your purchase. Again, you will need to check this with your intermediary or the lender directly as each lender has their own criteria and approach here.
Please get in touch with us if you need any further advice. You can email us at [email protected] or use the contact us page on our website – click here.
This article was originally posted in What Mortgage online. You can see the original article here. Please note this will launch a new web page.
