What a difference a week can make! Testing times for us all. I want to review a few key issues this week, hence the slightly bigger column than normal!
Let’s start with Mortgage Payment Holidays – As mentioned by the Chancellor last week, everyone may be entitled to a mortgage payment holiday of three months. The holiday allows a borrower to DEFER mortgage payments for an agreed period of time. At the end of the holiday, the normal monthly payments resume. HOWEVER, you will still need to repay the money owed and you WILL incur interest on your mortgage during the holiday. Please note that you will need to speak with your lender first and they will decide whether you are eligible for the payment holiday.
You should certainly not stop your direct debits but do continue with your normal mortgage payments until the lender agrees your payment holiday.
If you don’t need to, don’t take the payment holiday! This may sound strange, but behind the scenes, and despite saying it won’t affect your credit score, it will possibly affect your ongoing ability to borrow. No one knows exactly how these holidays will be accounted for when you go to re-mortgage or buy another property. Lenders want to see that you have consistently paid your last twelve monthly mortgage payments. If you take the payment holiday, you will have only paid nine. With the onslaught of technology making decisions, a computer may not be able to decipher that you’ve had an approved payment holiday for three months. It will only see that the mortgage has not been paid. In the interim, this is may seem small beer in the grand scheme of things. The reality is that, for onward future finances, it could be huge. We know this as in more normal climates, you can take one mortgage payment holiday and it is usually registered as a ‘U’ on your credit reports and we can sometimes have trouble getting these through lenders current systems.
Rates – are fluctuating hourly, with some resemblance to the crash in 2007/8. Some lenders have withdrawn rates at midnight and tell everyone the day after, so they won’t receive a spike of business. We all understand why bank base rate (BBR) changed but this has resulted in a huge number of Tracker rates (tracking the BBR) being withdrawn. Existing customers charging rates obviously reduce with the changes, but these great rates are not open to new clients. Fixed rates haven’t changed too much, but some have increased. It’s mainly criteria where we have seen changes. Some lenders have withdrawn high loan to values, so 95% deals and for Buy to Lets, many lenders have mainly dropped to 75% loan to value. In short, if you find a great deal, be quick!
Homeworking – Most brokers, lenders, surveyors are now fully functional from home. This is causing problems for some lenders. One major high street lender has already confirmed that it can only handle so many bits of business each day in the new format and as such, once it reaches its quota, it will stop taking further business for that day! Business continuity plans at their best!
Valuations – Although it’s a slightly different business as usual, the one part of the market we all rely on is the valuation of the subject property. The surveyor is the eyes of the mortgage lender and relies on their feedback to confirm suitable security. If the valuer cannot assess the property, the mortgage market will grind to a halt. This is the one bit I’m really concerned about and keeping a close eye on developments. Many lenders have already stopped physical valuations of properties to protect their employees. Watch this space.
Finally, we, at Impact SF are fully functional and working from home during normal business hours. We continue to offer our free advice service, so speak to the team, pick our experienced brains and we’ll help you wherever we can. Stay safe.