Recent weeks have proved a rollercoaster ride for the mortgage market, with several lenders withdrawing products and then expanding their ranges.
The coronavirus pandemic has affected millions of people’s incomes, which has meant lenders have been inundated with requests for mortgage payment holidays. According to trade body UK Finance, more than 1.6m mortgage payment holidays have been agreed so far, equivalent to one in seven mortgages. Managing this demand, combined with office closures and physical valuations having to be put on hold following the introduction of lockdown measures resulted in many lenders having to temporarily limit the number of mortgages they offer.
To try and keep the market moving, more lenders have been developing their use of automated valuations over the last few weeks, so that they could continue to process applications. Automated valuations are most likely to help those who are remortgaging and homebuyers with bigger deposits. If you only have a small deposit to put down, it’s more likely that a surveyor will need to visit the property in person.
There are still lenders that can consider mortgage applications for up to 90% of the property value however, so it’s a good idea to seek advice on the mortgage options that may be available to you, whatever your circumstances.
What happens next?
Steps are now being made to help get the market moving again, but until there is greater clarity on how soon lockdown measures can be significantly reduced, it’s difficult to know how quickly the mortgage market will be able to fully normalise. Here’s what you need to know if you’re in the middle of a property purchase or planning a move in the next few months.
What if a physical valuation is needed?
There will be a lot of transactions and applications in progress that need a physical valuation and these have effectively been frozen until surveyors are able to visit properties again.
The Government has now set out guidance aimed at enabling people in England to view properties and move home safely. Estate agents have been allowed to re-open and viewings will be allowed, while surveyors can also begin to carry out valuations.
Restrictions will still be in place to allow these activities to be carried out safely, and lenders are likely to have backlogs to work through, which could cause delays.
How soon restrictions can be safely eased will feed into how quickly these backlogs can be cleared, and there will be tens of thousands of people whose plans have been put on hold that need to start moving.
Will there be more mortgage application checks?
If your mortgage application was submitted a while ago, your lender may need to see some updated documentation if any of the information you provided them with is now out of date. They may also want to check that your financial situation hasn’t changed. For example, if you have been furloughed, lenders will usually take this income into account, but they will need to ensure that you’ll still be able to afford your mortgage payments now that you are being paid 80% of your earnings.
Your mortgage case manager will keep you updated about any additional information or paperwork you might need to provide.
What about new build properties?
A growing number of housebuilders have re-started work on construction sites in recent days, as long as they are able to adhere to social distancing guidelines. Although physical viewings of properties have been restricted, there’s potential for developers to use virtual tours to show potential buyers around. The new guidance will now allow for show homes to open, as long as they have set up a well-managed system to allow viewings to take place safely.
Here at L&C, we’ve seen potential new home buyers continue to make enquiries during the lockdown period, ensuring they are mortgage ready for when things normalise. New build homes are often popular with first time buyers with small deposits to put down, and who may be eligible for the government’s Help to Buy scheme.
The current situation is constantly evolving, but if you need any help or support either choosing or applying for a mortgage, we’re here to help. Our advice is completely free, so get in touch or use our mortgage finder tool to see which mortgage options are available to you.
Mortgage market update - What happens next?