The start of the year sees the UK enter a third lockdown as the coronavirus pandemic continues to take its toll. So how have the current restrictions affected your ability to get a mortgage in 2021?
A key difference with this lockdown, compared to the first lockdown back in March 2020, is that the property market is allowed to remain open, enabling customers to progress their home moves. The housing market has continued to remain buoyant throughout Brexit negotiations and a second coronavirus wave sweeping the nation, with the promise of a new vaccine keeping consumer confidence high.
However, numerous factors such as Government intervention, lender influence, and economic hardship will continue to impact the mortgage market, highlighting the importance of seeking professional mortgage advice during these uncertain and ever-changing times.
Although the Government announced the latest lockdown on Monday 4th January 2021, the Chancellor, back in December 2020, had already extended the furlough and loan schemes for workers until the end of April 2021, recognising that few businesses will remain untouched by the pandemic.
With employees across a range of sectors continuing to be impacted, mortgage lenders continue to monitor their approach on affordability criteria for affected applicants.
Some lenders are only accepting the reduced furlough salary as an income, while others are stipulating that more information is provided before calculating how much can be borrowed. Some lenders aren’t counting furloughed income at all in their affordability assessments.
If you're unsure about how a change in circumstances could impact your personal mortgage application, you should speak to your individual advisor and your lender as soon as possible.
Mortgage payment holidays
As part of lockdown 2.0 and the Government’s wider support, mortgage payment holidays were also extended until the end of March 2021 to help counteract the financial pinch during lockdown and give people the flexibility to either reduce monthly payments or to pause them completely for a period of time.
However, like any holiday, it must be paid back eventually and your lender may recalculate your repayment amounts, or extend your mortgage term, to cover the loan payments not made during the deferred period. If you feel that a mortgage payment holiday is something you may require, you should contact your mortgage lender to discuss the options available to you.
Currently, the deadline to apply for a mortgage payment holiday remains as 31st March 2021.
The return of low-deposit mortgages
Whilst Stamp Duty and Land Transaction Tax savings had helped encourage customers to move over the summer, one of the biggest challenges for budding buyers throughout 2020 was the limited availability of high loan-to-value mortgage products. First-time-buyers, in particular, felt pushed out of the market, as they needed to scrape together a much larger deposit than they were originally expecting, as mortgage lenders wrestled with balancing their risk exposure against supporting their customers with affordable products.
During December 2020 and into the New Year, however, the mortgage market has seen many lenders return to the 90% loan-to-value space on a consistent basis. This means buyers now have a lot more options available during this lockdown, as they may now only need a 10% deposit to get moving.
The welcome reintroduction of 90% loan-to-value mortgages from many of the big high street lenders, such as Nationwide, Halifax, and HSBC, marks a ‘vote of confidence’ in the mortgage market and will hopefully result in further competitive mortgage rates in the future.
Furthermore, to help first-time buyers onto the property ladder, a new Help to Buy Equity Loan scheme was launched on 16th December, enabling the purchase of a new-build home with only a 5% deposit needed.
In these uncertain times, and with the pace of change, if you are unsure about what options might be available to you, you should speak to a professional mortgage advisor.
As this situation is on-going and has never occurred before, there are no guidelines or takeaways from past occurrences to predict the outcome. This means there is a host of opinions on what house prices and mortgage rates will do over the course of the next few months and in the longer term.
A lot of the borrowing what-ifs will depend on the pandemic progression, political factors, and the continuing impact on the economy, all of which is beyond our immediate control. However, with so much change to the mortgage market since the start of the pandemic, speaking to a professional to help you navigate through this uncertainty is more important than ever.