Millions of people’s incomes have been affected by Coronavirus, with HMRC data showing that around 4.7m people remain on furlough. Many homeowners are delaying their remortgage plans as a result, due to fears that their reduced incomes will affect their eligibility.
According to a report from the Legal & General Mortgage Club, around one in three borrowers whose incomes have been affected by the pandemic are planning to stay on their lender’s SVR when their deals end and are likely to see a big jump in the cost of their mortgage payments as a result. The report says that borrowers moving onto SVRs could see annual mortgage payments increase by an average of around £2,500 compared to remortgaging onto a two-year fixed rate. Legal & General estimates that as many as 700,000 homeowners whose two and five-year fixed deals are due to finish this year could be impacted.
Kevin Roberts, Legal & General Mortgage Club director says: “While the coronavirus crisis has undoubtedly affected people’s finances in different ways, those who have seen their incomes drop will likely be finding this a particularly challenging time so it’s vital they avoid falling onto a reversion rate and paying more when there are other affordable options available.”
He adds: “Covid-19 may have dampened the confidence of a large number of borrowers wanting to lock into a new rate, yet the cost of not exploring their refinance options could be significant. Even for those borrowers who have seen a reduction in income, there may well be products available that would save them money in the long term when compared to their lender’s SVR.”
Your remortgage optionsIf your income has been affected by Coronavirus and you’re worried that this will reduce your chances of being able to remortgage, seek professional advice from a mortgage broker on the options that may be available to you.
You don’t have to automatically roll onto a standard variable rate, as your lender will usually be able to offer alternative rates, even if your income has fallen. Often this can be arranged as a straight switch, which can be the most straightforward option if you think you’d struggle to meet a different lender’s affordability criteria.
Provided you aren’t borrowing an additional amount, or extending or shortening your mortgage term, your current lender typically won’t need to scrutinise your income or outgoings either. A broker can assess not only what your existing lender will offer, but will also look across the whole of the market to see if you might be eligible for a better deal elsewhere.