13 May 2020
The government have announced plans to restart the housing market, which is great news for the estimated 450,000 people who've had to put moving home on hold during lockdown. If you're curious about moving home or remortgaging you probably have many questions including:
- How have mortgages changed since lockdown started?
- Are re-mortgage applications still being processed?
- And how will a mortgage payment holiday affect my credit rating?
With an understandably shaky start, the mortgage industry is bouncing back with a flexible approach and new offers to help borrowers. So whatever your home status - we've answered some of your most popular mortgage questions below.
Is now a good time to apply for a re-mortgage?
Well, that depends on a number of different factors. You may want to remortgage to finance a planned home renovation, or want to release some equity to help if you've been financially affected by coronavirus. Perhaps you're at the end of your current mortgage term and would like to lock in a fixed rate deal whilst interest rates are at an all time low. There are many possibilities for considering a remortgage at this time and the good news is that lenders are processing applications and adapting to the changes brought about by lockdown to get applications approved.
I’ve been furloughed and am on an 80% salary, can I still apply for a mortgage?
Mortgage lenders are understandably being a bit more cautious with lending in the current climate – however that’s not to say your application will automatically be declined if you’ve been furloughed. Many lenders will take your full income into account even if you’re now on a reduced salary if it can be shown that your employer is topping up your salary.
Your individual lender will assess your personal circumstances when you apply. The FCA (Financial Conduct Authority) requires mortgage lenders to lend responsibly which includes checking the affordability in the long term. If you have questions or concerns about your likely success with an application, the best way to get answers is to contact your mortgage lender.
I’ve taken a mortgage payment holiday because I’ve been affected by COVID-19, will this affect my credit score or ability to get a mortgage in the future?
The UK’s Credit Reference Agencies announced in March that they would apply special measures to ensure any individual who has taken a payment holiday during the COVID-19 outbreak would not have their credit score adversely affected.
It’s important to ensure that you’ve agreed the payment holiday with your lender first, as simply cancelling direct debits or missing payments without agreement will result in missed payments or defaults being recorded on your credit file.
If you’ve agreed the payment holiday with your lender in advance you can rest assured your credit rating will remain unaffected.
If you'd like to read more about mortgage payment holidays, check out our helpful guide here.
Why should I look at changing to a fixed rate mortgage now?
Variable rate mortgages follow the Bank of England’s base rate of interest. While interest rates are low and the economy is steady a variable rate can be a good idea. Recently however the Bank of England cut interest rates to an all time low of 0.1% which means they have only one way to go – and that’s up. By securing a fixed-rate mortgage deal now you’re not only locking in your monthly payment for the duration of the deal, but you’re also protecting yourself from interest rate rises during the term and potentially saving a lot of money in the long run.
How has the mortgage application process changed since lockdown?
At the start of the lockdown many lenders were cautious – only approving loans from applicants with large deposits. However now it seems that many lenders are adapting to restrictions and offering more deals and better terms to potential borrowers.
Some lenders have increased their LTV (loan to value) back up to 85% providing more flexibility for borrowers. Many are now conducting “drive-by” valuations (where surveyors use system generated valuations instead of physically visiting a property) to get mortgage and remortgage applications approved.
How might the housing market now be different?
After 8 weeks in lockdown many of us will have had time to re-evaluate our home priorities and this will doubtlessly be reflected in how we choose housing. Features such as a spare bedroom which can be utilised as a home office; or a larger garden could become even more key selling points going forward. With more and more of us working from home, it's also possible to see some moving away from commuter towns enticed by lower priced housing. Some may also consider extending their existing homes to provide more versatile space.
Whatever your future home plans, Hoppy is here to help. We've partnered with Mojo Mortgages, the online mortgage broker, who search over 90 lenders to find you a great mortgage deal.