Mortgage Market Update
With Coronavirus now impacting many peoples daily lives, we breakdown some of the topics surrounding the mortgage market at the moment such as lender capacity, mortgage holidays, and remortgaging.
Bank of England Base Rate Drop
The Bank of England Base Rate reduced on the 11th March and we saw the rate fall to 0.25% and since then it has fallen further to 0.1% (the lowest level in the history of the Bank of England).
For those that happen to be on tracker rates, your lender will likely have been in touch already to confirm the 0.65% reduction to your rate going forward and in addition notify you of your new monthly payments. For those on a Standard Variable Rate or other variable natured rates not directly linked to the Bank of England Base Rate, lenders are still coming out with updates as to whether they will pass on this reduction, some of it, or none at all.
The situation around both the economy and what fiscal stimulus would be appropriate next is ever changing. Will we see a further reduced Base Rate? What can it fall to? If it does fall, when will this be? All the answers to these questions are not for here or speculation but likely will be answered by events going forward.
Mortgage Rates
A question often asked since the Base Rate drop is what impact will it have on offered mortgage rates for individuals or limited companies looking for a new mortgage.
Due to the unprecedented nature of the cuts, lenders are still deciding on how this may impact their offered rate range. At time of writing (27th March 2020) there are some rates now being offered below 1.00%1 but in a time where lender margins on standard residential mortgages and buy to lets are thin, it is questionable how much lower offered rates will go.
Lenders are quite rightly focusing on keeping up with their existing clients applying for payment holidays and asking questions. Therefore, product pricing is not of paramount importance right now as some lenders are even restricting applications.
Remortgaging
Often as a broker, we encourage individuals to look at their remortgage options up to six months prior to their existing deal coming to an end. Why do we do this:
– A large portion of lenders on the residential and the buy to let side, 26, allow a remortgage offer to be valid for 6 months2
– It can give a borrower piece of mind that a rate with a new lender is available to them in plenty of time. This can be important for borrowers who are perhaps remortgaging from an interest only mortgage maturing. Around 41,000 borrowers with regulated interest only mortgages will reach the end of their term in 2020 owing on average £104,0003
– It gives a borrower time to consider all options without feeling rushed into a last minute deal or ending up on their existing lender’s Standard Variable Rate
– Such a time period can help iron out any potential bottlenecks in the process. For example, a transfer of title (where someone is removed from a mortgage and title of a property) can take longer than say a typical remortgage and as such there is plenty of time allocated for such a request. Other bottlenecks are coming through everyday at the moment, such as restrictions on physical valuations and the majority of solicitors now working from home.
Remortgaging can also involve extra borrowing on home improvements or for other reasons and as such, the earlier you can have the discussion with your broker the better.
Remortgaging is still possible and provided the lender has signed up to interim measures from the land registry then things can still proceed. For more information, contact your broker.
Capacity and Coronavirus
As mentioned above, many peoples daily lives are now being impacted by Coronavirus and we would be remis not to highlight that this will also effect the mortgage process as there can be several groups involved in one mortgage transaction such as:
– Mortgage Brokers
– Mortgage Lenders
– Solicitors
– Surveyors
– Estate Agents
In the coming weeks it may be the case that capacity to progress mortgage applications (from a lender standpoint) and mortgage completions (as purchases are now certainly on hold). Therefore, we would encourage people to get in touch with your mortgage broker (provided they too aren’t effected) to discuss timelines and mortgage options. As mentioned above though, remortgaging is still possible.
To highlight an example, the typical length of time to remortgage from one lender to the another is 4-6 weeks under normal conditions. It would be sensible to assume that this timeline will be pushed out in the coming weeks and months and this means speaking about your mortgage perhaps earlier if you are not already speaking around six months prior to your deal ending as discussed above.
Physical surveys are no longer being carried out and so technology will play an important role in keeping these deals moving. Ask your broker for more details.
Your Mortgage
It is encouraging that almost all mortgage lenders have come out to say that they could allow their customers to defer mortgage payments4 if effected by Coronavirus. This will be welcome for many borrowers and like everything else will evolve going forward.
It is always advised to engage with your mortgage lender as early as possible if you feel you may have payment difficulties ahead. Again due to potential capacity issues, this is more important than ever.
We will shortly be publishing a regular updated list of lenders and what they are doing in light of the above.
The same will be true as to which lenders are still “open for business” during this time. Purchases may be on hold but in the right circumstances, remortgaging (for now) can still happen.
Summary
There are many, many moving parts to the Coronavirus pandemic and clarity isn’t always forthcoming for a wide range of topics. Hopefully the above helps a little and if you have any questions, please get in touch by emailing randal.mclister@condieswealth.co.uk – you can also follow Randal on Twitter, LinkedIn and Facebook.
For help and advice around what other help is out there if you are employed or self employed, please see Condie’s blog articles for up to date information.
Footnotes:
1: Source, The Times, Saturday 14th March 2020
2: Source, CriteriaHub, 17th March 2020
4: Source, FT, 10th March 2020