Tag: mortgages

Everything you need to know about getting a mortgage during Covid-19

Covid-19 is impacting many families and individuals in very different ways. But with so many of us spending more time at home than ever before, many people are thinking about whether they can move or extend to gain more space, or just taking advantage of lower interest rates.

The housing market is now opening up and rates are changing yet many people are unsure about whether mortgages are available for them.

TSB’s Head of Mortgages, Nick Smith answers some important questions on getting a mortgage in the current environment: 

Can I still get a mortgage in the current environment?

Yes, you can. However, getting a mortgage really depends on individual circumstances. Think about your personal situation – is your income sustainable? Are you happy with the deposit you’ve built?

If you’re planning to get a mortgage, speak to your lender or broker openly about your financial situation and they will be able to advise on the best options for you.

Can I physically view properties?

Estate agents are opening up and you should be able to do physical viewings in England. But in Scotland, Northern Ireland and Wales viewings are not yet permitted.

If you’d prefer an electronic viewing – speak to your agent, they can likely help you, although for many people, nothing can replace the sense of space and perspective you get from being physically in the property.

Can I get a valuation or survey done on a house I want to buy?

Yes, most lenders are now conducting physical valuations where electronic valuations have not been possible.

Most surveyors will be taking their precautionary measures with full PPE equipment, therefore ensuring the homeowner’s safety as well as their own.

However, more and more lenders are using electronic valuations, which are very accurate and can be done very quickly. Remember – the valuation done by your mortgage lender is to satisfy themselves that the house is a good security for your loan.

I’d always advise when buying a new house that you consider a more detailed survey for your own benefit and peace of mind. The RICS consumer guide to home surveys on their website is a useful guide to your different options.

Are first time buyers impacted more than second time buyers?

No, they’re not. It really depends on how much equity you have either as a first-time buyer or those remortgaging/buying a second property.

If you’re looking to remortgage just remember you don’t have to move to a new bank/lender. All major providers will offer a product transfer which means that you can move to a lower rate.

Is there anything I need to be aware of when applying for a mortgage in this environment?

There are a few things to bear in mind. Crucially, it’s important to think about your financial situation. Has your income changed recently? Will you be able to make payments now and in the future? When speaking to your lender/broker, provide as much information as you can about your income. Ultimately, they will want to protect you as much as possible, so that you can comfortably meet your payments and not find yourself in a financially vulnerable position.

For example, consider the following when speaking to your mortgage advisor: have you been working more overtime than normal lately? Will this continue in the future or will your hours and overtime reduce?

Most lenders will lend to those who have been furloughed but each lender will have their own lending criteria. Your mortgage advisor will be able to help with the best options for you. For more complex income circumstances, a specialist mortgage broker will be able to talk through your options.

The physical process of buying a house has also changed very slightly – there will be more social distancing for example and so it is likely a mortgage meeting will take place over the phone rather than face to face.

A mortgage meeting over the phone is easier to book in whereas face to face is a little more difficult at the moment. The Government has recently issued detailed guidance on how house viewings should be conducted with social distancing in mind.

With the rapid market changes, we’ve also seen banks responding very quickly and reintroducing higher loan to value products. At the moment, most banks have reintroduced lending up to 85% of the value of the property – so there are more mortgages becoming available again for those with a 15% deposit. Do your research and speak to your advisor about the best mortgages for you.

If I’ve been offered a mortgage is my bank obliged to offer it if my circumstances change?

No, they’re not. Offers can only be withdrawn under certain limited conditions but this includes a change in income. If your circumstances change, speak to your lender or broker as soon as possible.  It’s important to remember that they will always want to ensure you can afford repayments now and in the future and they will work with you to find the best options for you.

I’m thinking about enlarging my home to create more space – how do I get a mortgage for this?

You have three options to consider, and the best option for you will depend on a number of things, such as how much additional money you need to borrow, how much your house is worth, and whether your current mortgage is still in a period where early repayment charges apply.

Option 1: would be to speak to your existing mortgage provider about a “Further Advance” – essentially borrowing more money on your existing mortgage. This is likely to be the quickest option to get funds in your bank account, as there’s no change in lender, but you should weigh up both the convenience and the cost, as it won’t necessarily be the cheapest option.

Option 2: would be to move your entire mortgage to a new lender under a remortgage process, taking additional borrowing as part of your application. If you want to take this option, be careful to speak to your existing lender about any early repayment costs associated with your current mortgage.

Option 3: would be to take out what’s known as a “second charge” loan – this is where a new lender advances you the money, accepting that if you default on your mortgage and your house is repossessed, they only get funds from your property once the first-change lender (i.e. your main mortgage) has recovered their debts. As a result, these are usually more expensive interest rates, and are less common in the market.

If the above options don’t appeal, or if you don’t have much equity in your property, you could also consider an unsecured loan.

Whilst interest rates are usually higher than on mortgages / further advances, there is some flexibility in taking a separate unsecured loan, as long as you can afford both payments, and most mainstream lenders will offer up to anywhere between £25k and £50k as their maximum unsecured loan amount.

Do note though, repayment terms are usually shorter, so these will almost always have a higher monthly repayment.

I’m not feeling confident about buying in the current environment, what should I do with my deposit?

If you’re feeling uncertain about buying a house right now, think about when you believe you might feel ready. When thinking about where to put your hard-earned deposit, consider whether you really want it tied-up.

If there’s a chance that you might find somewhere you would love to buy in six months, then putting your deposit in a longer fixed-term savings account, where you might forfeit interest if you withdraw early, probably isn’t the right thing to do, even if it has a slightly better interest rate.

Equally, you should think very carefully before moving any of your deposit into stocks, shares or funds, where the value could go down as well as up – what if the value has decreased at a time you want to buy? Would that be a problem for you?

If so, now probably isn’t the time for that sort of investment. Speak to your bank about your options, they can assist and talk you through what is suitable for you and your circumstances.

Nick Smith, TSB’s Head of Mortgages, concludes: “The market is changing rapidly and we are seeing some confidence grow in the housing market, which will be welcome news for those eager to buy a new home or to remortgage.

“There are mortgages available, but you will need to remember to do your research and have open discussions with your mortgage advisor.”

 

Support for customers who are struggling to pay their mortgage due to coronavirus

The Financial Conduct Authority (FCA) has today announced proposals which will continue support for customers who are struggling to pay their mortgage due to coronavirus (Covid-19).

The proposal outlines the options firms will be required to provide customers coming to an end of a payment holiday, as well as those who are yet to request one.

For customers yet to request a payment holiday, the time to apply for one would be extended until 31 October 2020.

For those who are still experiencing temporary payment difficulties due to coronavirus, firms should continue to offer support, which could include extending a payment holiday by a further three months.

Christopher Woolard, Interim Chief Executive at the FCA, said: “Our expectations are clear – anyone who continues to need help should get help from their lender.

“We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

“Where consumers can afford to re-start mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a payment holiday, will continue to be able to apply until 31 October.’

If the proposals are confirmed, the FCA would expect:

  • Customers who can afford to return to full repayment should do so in their best interests – at the end of a payment holiday, firms should contact their customers to find out if they can resume payments and if so, agree a plan on how the missed payments will be repaid.
  • Anyone who continues to need help gets help – lenders should continue to support customers who have already had a payment holiday where they need further help. Firms are expected to engage with their customers and find out what they can re-pay and, for those who remain in temporary financial difficulty, offer further support. As part of this firms should consider a further three-month payment holiday.
  • Extending the time the scheme is available to people who may be impacted at a later date – customers that have not yet had a payment holiday and experiencing financial difficulty will be able to request one until 31 October 2020.
  • Keeping a roof over people’s head during a public health crisis – the current ban on repossessions of homes will be continued to 31 October 2020. This will ensure people are able to comply with the government’s policy to self-isolate if they need to.
  • Payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files. However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.

This guidance would not prevent firms from providing more favourable forms of assistance to the customer, such as reducing or waiving interest.

Firms should consider signposting customers towards sources of debt advice. Debt advice may be helpful for customers coming to the end of payment holidays and may be particularly useful for consumers with pre-existing payment shortfalls or who are likely to be in longer-term financial difficulty.

When implementing this guidance, firms should be particularly aware of the needs of their vulnerable customers and consider how they engage with them. For customers who aren’t able to use online services (such as digital channels), firms should make it easy for customers to access alternatives.

The FCA welcomes comments on these proposals until 5pm on Tuesday 26 May and expects to finalise the guidance shortly afterwards.

This guidance only applies to mortgages. It does not apply to consumer credit products which are covered by separate guidance which will be updated in due course.

Gareth Shaw, Head of Money at Which?, said: “The extension of these measures will bring relief to people who would otherwise struggle financially during the challenging months ahead.

“Mortgage lenders should make the process as straightforward as possible, ensuring people can easily access the support they need.

“Consumers should also consider their options carefully as a mortgage payment holiday will likely lead to increased payments in the future – so it is likely to be in their interest to continue making payments as normal if that is feasible.”

‘Common sense’ to prevail over mortgage lending

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‘Only borrow what you can afford to pay back’. That seems obvious enough now, but during the property boom the sky was the limit and credit was easy – with disastrous consequences. Lessons have been learned, and new rules come into force tomorrow (26 April) to protect borrowers and ensure a ‘common sense approach’ is taken for every lending decision.  

The rules – known as the Mortgage Market Review (MMR) – were drawn up by the Financial Conduct Authority (FCA) as a result of the recent financial crisis and are designed to protect consumers from the kind of reckless mortgage lending that would leave them unable to make repayments.

To ensure that people only get a mortgage they can afford, and to prevent a recurrence of the irresponsible lending practices of the recent past, every borrower will now have to prove that they can afford the repayments both now and in the future. The new scheme will include a new affordability check that will see applicants interviewed by a lender and asked about their income and outgoings.

The FCA has produced a short guide that explains the changes, and around half a million copies will be given out to prospective borrowers in branches of high street lenders, mortgage advisers and estate agents.

Martin Wheatley, the FCA’s chief executive, said: “In the past too many people got a mortgage by simply telling their lender they would have no problem repaying their debt, and that was that. Getting a mortgage can be one of the biggest financial decisions people will ever make, so it needs careful consideration. Our new rules will hard-wire common sense into mortgage lending, and the guide we have created will help explain those changes to borrowers.”

The mortgage industry has been busy getting ready for the changes for about 18 months and many firms are using the new approach already, so some borrowers will not notice the difference.

The FCA has also updated its consumer information pages on its website, at: www.fca.org.uk

Help to Buy scheme launched

A £12billion scheme to help thousands of people buy a home of their own will be launched today (Tues 8 Oct) by the Prime Minister and Chancellor. David Cameron said Help to Buy will ‘turn the dream of home ownership a reality for many’.

High Street banks including Natwest, RBS, Halifax and Bank of Scotland will start offering new Help to Buy mortgages this week, and others are to follow: Virgin Money has also confirmed they will participate in the scheme, and will be offering new guaranteed mortgages to borrowers in the New Year. Aldermore Bank has confirmed that it is joining the scheme in January, and is exploring whether this date can be brought forward.

Natwest and RBS customers will be able to start the process of applying for a mortgage today, with other banks to follow in the next few days.

The Help to Buy: mortgage guarantee is aimed at thousands of people frozen out of the housing market because they cannot afford large deposits of up to 20 per cent of a property’s value.

It means someone trying to buy a £200,000 house currently needs to save up a deposit of £40,000.

Leading banks will offer a range of new Help to Buy mortgages – up to 95 per cent of the property’s value – for homes worth up to £600,000.

Under the scheme, buyers will only need a deposit of as little as 5 per cent.

Depending on the size of deposit, the government will then guarantee up to 15 per cent of the property’s value, in return for a fee from the lender.

There will be scheme advertisements in national newspapers from tomorrow, banks are braced for a flood of interest from the public.

The launch of the scheme has been brought forward by three months, as the details are finalised and lenders are in a position to start offering the mortgages.

Lenders can start offering the mortgages now, and they will be guaranteed by the government from January 2014. As it usually takes a few months for borrowers to go through the mortgage completion process, this delay is not a problem for lenders. If borrowers do complete before January their mortgage will be included in the scheme.

Prime Minister David Cameron said: “Too many hardworking people are finding it impossible to buy their own home – people who can afford the monthly mortgage payments but haven’t got rich parents and can’t pay the deposit up front.

“There is a need for Government to act. Buying your first home is about far more than four walls to sleep at night. It’s somewhere to put down roots and raise a family. It’s an investment for the future. Above all, it’s a sign that everything you’ve put in has been worth it.

“Our Help to Buy Equity Loans, have already helped over 15000 people buy a new home. But we’ve got to go further and finish the job we’ve started. So from today, thousands of people will be able to get a foot on the housing ladder by applying for the new Help to Buy mortgage guarantee. If you’ve got 5 per cent of the funds for a mortgage deposit, we’re providing a guarantee to the banks to help you get the rest.

“Help to Buy is going to make the dream of home ownership a reality for many who would otherwise have been shut out. This goes right to the heart of my vision for Britain – a country where everyone who works hard can get on in life. Moves such as Help to Buy will also encourage housebuilding. If potential buyers can’t buy, builders won’t build – so this is an important part of unlocking the market.”

The Chancellor of the Exchequer, George Osborne added: “Through Help to Buy: mortgage guarantee I want to help those families that have saved for years, earn decent salaries, but cannot afford the deposits currently being asked for by the banks. I want young people to have the same chance of getting on the property ladder as their parents and grandparents.

“Too many people are still being denied the dream of owning their own home, which is why we have brought forward the launch of this scheme, so as of today borrowers can start applying for a mortgage with a five per cent deposit.”

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