Coronavirus and Mortgage Payment Holidays

Covid 19 and Mortgages

What a week it has been! I’ve gone from seeing clients in the office two weeks ago to lockdown at home. As most of the country is experiencing such a major change in our lifestyles, hopefully for the short term, I thought I would try and collate some useful information around mortgages.

At the time of writing all of the high street lenders are struggling to process applications due to staffing levels and any mortgage that needs a physical valuation (i.e. a surveyor to look around the property) are effectively on hold as the surveyors are on lockdown.

Barclays this week started to restrict the number of applications they would accept. Refreshing their allocation at 10 am each day. I think the level of applications is going to calm down quite soon, the longer we get into the lockdown zone.

Halifax are restricting applications also, anyone wanting to borrow more than 60% of the property value cannot go to the Halifax at this time.

If you are moving house then these are the guidelines that have been set out:

Home buyers and renters should, as far as possible, delay moving to a new house while emergency measures are in place to fight coronavirus

If moving is unavoidable for contractual reasons and the parties are unable to reach an agreement to delay, people must follow advice on social distancing to minimise the spread of the virus.

Anyone with symptoms, self-isolating or shielding from the virus, should follow medical advice and not move house for the time being

Another big issue is payment holidays and where you stand with those. It does vary from lender to lender but as a rule they will have set up an online process where you can apply to suspend your payments for three months. The interest will be added to your mortgage so your debt will increase, most lenders have said this will not affect your credit rating but do check with your lender.

Here are some links to some lender’s payment holiday sites:

Santander: https://mortgagesignup.santander.co.uk/onlinecredential/mortgage-holiday

Halifax: https://www.halifax.co.uk/mortgages/existing-customers/payment-holidays/request-a-holiday/

Nationwide: https://www.nationwide.co.uk/support/coronavirus/mortgage-payment-holiday

HSBC: https://www.hsbc.co.uk/help/coronavirus/financial-support/

Barclays: https://www.barclays.co.uk/coronavirus/mortgages/

If you are a buy to let customer then you can also apply to your lender for a payment holiday if your tenant is struggling to pay you.

I hope these help but in the meantime please stay safe.

I am open for business and I’m happy to do face to face meetings online, I had a Zoom meeting yesterday that worked well. So if you have any questions or want to talk about your mortgage options then I am happy to help where I can.

How will the Interest Rate cut effect my mortgage?

If I was asked a week ago “Will Coronavirus effect my mortgage?” I would have dismissed it as ridiculous. However this morning the Bank of England have announced a slash of the interest rates by 0.5% to 0.25%. 

These are unusual times as one would not expect the Bank of England to be getting involved in a health crisis. The Chancellor has a lot on his plate when he announces his first budget today. It is widely expected he will announce spending plans as part of Boris Johnson’s election pledges but he also has the backdrop of an economic crisis brought on by the Coronavirus.

Firstly mortgage rates, I expect this cut to be a short term measure and would be surprised if the rate was still 0.25% in the summer. However if the rate remains at this level beyond the summer then there is a reasonable chance we could see headline mortgage rates falling a little. Do bear in mind they are very low already, with five year fixed rates being available from a staggering 1.49% (with the right amount of equity/deposit). 

If you have a tracker mortgage then you can expect your rate to drop from 1st April, do check your T’s and C’s just in case your particular tracker deal has a “floor” beneath which your rate cannot fall.

In the budget later it is expected there will be big spending plans but also there is pressure to reduce the burden on small businesses. I think there might be a reduction in corporation tax and possibly a short term reduction in VAT. The worry for the chancellor must be “how can i cut tax and spend more? Where is the money going to come from ?” I guess he could put an emergency tax on toilet roll and hand gel!

I think for the majority of us the rate cut won’t have a massive effect. If the Coronavirus crisis is short lived then we can all get back to normal and live happily ever after. However if things get worse, as some quarters are predicting, then a reduction in the major household outgoings will be welcomed by the general public and will hopefully mean the UK doesn’t slip into recession.

These are unprecedented times and nobody really knows what will happen. The message I’d like to leave you with is: Wash you hands.

Is now the right time to Remortgage?

In my career as a mortgage broker I have more often than not recommended taking a two year deal out to clients, of course individual circumstances are important to consider but in the main two year deals have been incredibly popular.

If you are someone who fixed their deal two years ago you will have been one of the lucky homeowners taking a deal when the lowest ever average two year fixed rates were available (this was September 2017 according to Moneyfacts, the average two year fixed was 2.17%).

This will mean that in the next month or two if you haven’t already done something about it your mortgage payment is going to jump onto the lender’s standard variable rate. I remember organising some deals with Accord Mortgages a couple of years ago that were at a fantastic fixed rate of 0.99%. I told my clients that they were unlikely to get this sort of deal again. Accord have a standard variable rate of 4.99% so the interest charged to you will be five times higher if you do nothing.

Luckily it is relatively easy to switch mortgage deal these days and more and more lenders are offering competitive deals to their existing customers. Historically this was not the case but lenders are realising the best customers they can get are the ones they already have.

Speak to your broker and have a look at what your existing lender can do. Often I find that the existing lender doesn’t have necessarily the lowest rate available but to save on the hassle factor it can be easier to stick with them rather than change lender and have to involve third party solicitors that can frustrate the process.

Rates are still very competitive but there aren’t any deals at less that 1% fixed today, however there are plenty of deals at around the 1.5% mark for two years and the five year fixed options are being exercised by many people with competition here pushing the five year rates (as long as you have sufficient equity) well below 2%.

Hopefully your broker has been in touch to remind you that your deal is coming to an end, also lenders will usually write to you to let you know so that you have enough time to do something about it. If not then hopefully this article will prompt you into action. Needless to say if you happen to end up on the standard variable rate then when the mortgage payment goes out of your account you’ll probably sit up and notice.

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY  MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. 

YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.

Thinking of Buying a Second Home?

Thinking of Buying a Second Property? Here’s my story:

Last year I wrote about developing my family home with the idea of increasing its value. I was fortunate to be able to add value to my property and now that the building work is all but over (it never really stops does it!) we are ready to embark on another journey.

Every year we holiday as a family in the beautiful Lake District, my wife and I have always said we would love to own a property there but have never really been in a position to do anything other than dream, until now.

It seems that the stars are lined up in our favour at the moment as the house has increased in value and we are now looking to release equity and use that to go towards a second home.

We don’t have a big stash of cash anywhere so we are borrowing money to buy somewhere. It is a risky approach but due to the mortgage offerings in the marketplace I feel it is a calculated risk.

If you are thinking this might be something you want to do then read on. Firstly you need to aim for at least a 25% deposit, in my case this is coming from the equity being released from a remortgage. Yo will also need to account for stamp duty and this carries an extra 3% tag on it as it is not going to be a main residence.

Have a think about what you are going to use the property for. If it is solely for personal use then you may be able to get a standard residential mortgage, these are subject to affordability and the lender will assess your income to ensure you can afford to run two properties. There is an interesting product available from Metro Bank at the moment that allows you to let the property for up to 90 days a year. This could help you making the mortgage payments. Also you will only need a maximum of 15% deposit so you can leverage a little here.

Do you want to let the property? If so there are a couple of approaches you could take. Income from the property will be taxed at your highest tax rate so you need to take advice from an accountant in this regard. Inland revenue rules state that if the property is a furnished holiday let and is let for 105 days per year or more the new income tax rules for rental income do not apply and mortgage interest can be a tax deductible expense. If you are taking up a holiday let product the Furness Building Society have a good product but you need a 25% deposit and the rates are not as competitive as a standard residential mortgage. The good thing about Furness though is that they allow you to use the property yourself as well whereas other holiday let providers do not.

This is not the property I have in mind!

At the moment I’m still looking for the right property so have yet to take the plunge. However whether it is the Lake District, Scotland, Cornwall or Blackpool if you are in the position of having a decent amount of equity to leverage then you don’t necessarily need cash in the bank to get that second property.

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY  MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.