Will it be difficult to get a home loan after confinement?
Whether you’re a first-time buyer, a mover, or a homeowner looking to remortgage, it’s a complicated time to navigate the mortgage market.
In recent months, banks have withdrawn and reinstated agreements based on government regulations and their own resources.
And with mortgage payment holidays and lending rules for customers on leave adding further complexity, it’s no surprise borrowers are feeling confused about their options.
Here, we explain the current state of affairs for people looking to get or switch mortgages, and offer advice on whether now is the time to get a good rate.
Mortgage options for first-time buyers
Do 90% and 95% mortgages come back?
Over the past few days, the Yorkshire Building Society has launched a new 90% mortgage, but with Nationwide having just withdrawn its range of 90% and 95%, it’s a tumultuous time for low deposit offers.
The table below shows how the number of available offers has decreased since early March.
90% loan to value
95% loan to value
Moneyfacts indicates that first-time buyers may even struggle to secure mortgages that are still available. It says HSBC offers the lowest rates of 90% but limits the number of applications it will accept each day.
Moneyfacts’ Eleanor Williams says: “Lenders have found they have been overwhelmed by the level of demand, which has forced some to pull recently relaunched deals in order to manage their workload.”
“The reintroduction of more offers for those with 10% or even less down payment by more lenders would hopefully give potential buyers the choice they need to go ahead with the purchase. of a house.”
Moving or remortgaging: the best rates
With a loan-to-value ratio of 60%, 75% and 85%, there are currently more than 100 two- and five-year transactions in the market, as shown in the table below.
And the best rates are also attractive. Moneyfacts data shows deals are available up to 85% LTV with a rate significantly below 2% as shown below.
Can I get a mortgage if I’ve been furloughed?
So far, we’ve looked at how many offers are available and at what rates. But for some homebuyers and mortgagers, the biggest issue will be getting accepted when they come to apply.
If you were laid off during the COVID-19 outbreak, you may find that your options are more limited than before.
The lenders have collectively agreed that their existing customers can remortgage on the same terms whether or not their income has been affected by the pandemic.
However, if you are looking to borrow more on a new mortgage, change lenders, or take out a new mortgage to move house, you may find that banks will only consider your income on leave.
This means that your borrowing power could be assessed on just 80% of your usual income, potentially reducing the amount you can borrow or preventing you from accessing a good deal.
Some banks will consider any top-up from your employer if they provide a letter of confirmation, while smaller lenders may be more likely to assess applications on a case-by-case basis.
If you’re considering getting a mortgage after being furloughed, consider talking to a broker about your options.
What to do if you’re having trouble paying your mortgage
If your finances have been affected by the COVID-19 outbreak, you can ask to suspend your mortgage payments for three months.
If you have not yet requested a payment holiday, you can do so until October 31. If you already have a payment holiday, you can extend it for another three months.
It’s important to note that if you defer your payments, paying off your mortgage will take longer and cost you more. And, while a payment holiday won’t affect your credit score, banks might still take it into account when assessing your affordability for any future borrowing.
With that in mind, it’s worth contacting your lender to see what alternative options are available before suspending your payments.
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