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Covid 19 - Mortgage Worries?
Rachel Allan • Mar 25, 2020
Advice on Mortgage holidays and Remortgaging at this difficult time.
27 March 2020
We appreciate that this is a very challenging time and there will be many people facing worries including about how they are going to manage financially.
Things are changing rapidly in the world of financial services as they are in many other industries and we know it is hard to keep up with developments; the sheer volume of news and information is enormous so we have included here just some of the main issues that we think are likely to be on your mind.
Mortgage Repayment Holidays
- Due to the Coronavirus crisis the Chancellor has agreed with lenders that they will allow a payment holiday of up to three months for those who are struggling to make payments.
- Thankfully, and rightly so, mortgage lenders are all following government advice to offer payment holidays to borrowers to help ease the financial pressures that borrowers may be feeling. Many lenders have been very quick to put in place simple online forms for their customers to be able to request the payment holidays, which is great.
- There is no shame in needing the holiday as it will be many who are affected by this, not just a few. It may be that a holiday from your mortgage payments allows you some breathing room for the next 3 months if you are experiencing a drop in pay, or to boost the pot of savings there for the rainy day, or maybe allows you to chip away at that expensive credit card debt that has been difficult to reduce over recent months or years.
- The repayment holiday gives you the flexibility to either reduce or stop your payments for up to three months.
- However, we would stress that the payment holiday is not the right solution for all, and before signing up to take the holiday, you should make sure you read and understand what the payment holiday means for your future monthly payments, your credit score and your mortgage term and balance, as some lenders will increase your future payments to adjust for your holiday whilst others will increase the mortgage term
- It is important to understand that this is not a gift of money to you and you will probably eventually have to pay it back.
- We also don’t know yet how long we are likely to be affected by this virus and whether 3 months is actually enough time to start returning to work. I would also bear this in mind before diving in to accept the payment holiday now, as it may be that you need it a little later down the line.
- Different lenders will offer different arrangements but a likely outcome would be for the amount to be paid back to be spread over the remaining term of your mortgage.
- Unfortunately we are unable to make a mortgage payment holiday requests for you so you will need to approach your lender directly. Each lender may work differently in how they assess these requests and before agreeing the holiday they may need to understand how you have been affected.
- Lenders' telephone lines are likely to be very busy at the moment so we would advise you to first check your lender's website for any specific guidance they may have published as to how they will implement this.
New Mortgage or Re-Mortgage Applications
- Again, things are changing day by day. At this point in time it may still be possible to arrange a refinance however each case will need to be looked at individually before we are able to confirm what is possible.
- At this stage it may be more challenging to submit a new mortgage application where you are looking to purchase a property – again we will need to assess each case individually.
- Interest rates - Good news for some mortgage customers is that the Bank of England has reduced the base rate twice in recent weeks.
- For those of you currently on fixed rates, unfortunately you will not see any changes to your rate.
- Existing mortgage customers on a tracker rate should now see a reduction in your monthly payments.
- Some lenders have also reflected the reduction in their standard variable rates however it is up to each lender as to whether they reduce their standard variable rate in line with the Bank Of England’s rate.
- Re-mortgages do rely on valuation and legal services so may be subject to delay where these services are operating more slowly or not at all.
Selling or Buying a House
27 March 2020
- The government has today announced that if you are just beginning this process you should put it on hold.
- If you are already in the middle of a transaction there is a chance that there could be considerable delays but this will depend on what stage you are at.
- If you have recently commenced a mortgage or re-mortgage process that too could be delayed however we will do our utmost to continue to see it through to completion.
- Lenders have already been withdrawing many mortgage products so that if you are in the early stages there could be disruption. We will of course work hard to continue to keep you informed.
- If you have already received your mortgage offer it is likely that your mortgage will continue however this will vary from lender to lender and we would advise you to contact us for further information.
- All of the associated services are also impacted including conveyancing, legal and valuation services, once again meaning a strong chance of delay.
- Your sale or purchase may be part of a chain and this creates a further opportunity for delay.
And finally ...
Please don’t sit and worry about this in silence. If you are concerned about your ability to make payments in the short term, or are unsure if it is the right solution for you, then please pick up the phone and call your lender.
We are here to provide you with as much guidance and reassurance as possible through this difficult period of time and we will continue to provide updates here. But don’t be afraid to speak to the lenders. They do understand. They have put the resources in place and we should be able to trust them to put knowledgeable people on the phone who can help you and who can explain what it means for you should you take the holiday or whether it is right for you.
In the meantime, please keep safe and try to stay positive! Above all we wish that you and your families will remain safe and well.
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