With new measures to protect the UK's economy announced almost daily, mortgage providers are now attempting to adapt to the levels of changing demands and risk profiles.
We've outlined key points that you need to be aware of, if you currently have a mortgage or looking to apply for one.
1. Banks withdrawing mortgages options
Most banks are agreeing to extend their mortgage offers by three months, so that buyers can move at a later date when everything has calmed down a little more. However, certain banks like Halifax and Barclays have scrapped new mortgages unless buyers have at least a 40% deposit to put down.
In fact, according to Moneyfacts, buy-to-let mortgage options have reduced by almost 50% since the beginning of March 2020. So if you happen to be a landlord with a 'small' deposit there are a lot less deals available to you now.
2. Mortgage Holiday vs Interest-only
Although a three month mortgage holiday may seem appealing to some during the current climate, it may not be the best way to move forward. You will still have to repay the loan amount and the amount you would have paid during the break would just be added to future payments.
Banking giant Nationwide recently announced that they were bringing back interest-only mortgages, but applicants would only be eligible if they earn over £75k as a single person and over £100k in a partnership. They would also need equity matching 40% of the property value.
Interest-only mortgages mean that your monthly repayments will be considerably less, which is good right now. However, you'd end up paying more in the long term. This option would be one to consider if you have a plan in place to repay the capital of the loan.
3. Furloughed mortgage applicants
If you have been furloughed during or before the application process, your 'furloughed income' will only be taken into account and not your previous salary, bonuses, overtime or average commission.
To put this in context, if you had a £60k salary you may have been eligible for a mortgage for £240k. However, under a 'furloughed income' you may only qualify for a £120k mortgage!
However Nationwide and Natwest are now offering a scheme to accommodate furloughed workers.
4. Mortgage interest rates and savings
You may be aware that the Bank of England slashed interest rates to just 0.1% to reduce the cost of borrowing, however this hasn't yet been reflected in the mortgage field just yet.
In fact, many would have received communication from their banks saying that their savings rates had been slashed. For anyone on a variable rate mortgage may notice that the interest rate on this has gone up.
5. Assurance for mortgage customers
The Financial Conduct Authority (FCA) have released updated guidance to support both consumers and firms. Christopher Woolard, interim chief executive, stated "we are making it clear that no responsible lender should be considering repossession as an appropriate measure at this time."
He went on to make it clear that lenders should grant a payment holiday with no additional charges once over (apart from additional interest). The lenders should also ensure that this arrangement does not negatively impact their customer's credit score.
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Normette Homes specialise in property investment and tenant sourcing.
Email: info@normettehomes.co.uk
website: www.normettehomes.co.uk
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