What is going on in the mortgage market?
Mortgage lenders have made significant changes to the availability of their mortgage products, some lenders are even going as far as to stop any new mortgage lending.
This is not limited to the smaller banks and building societies but has been across the entire spectrum including major high street banks.
Why are they doing this?
There are a couple of major reasons why lenders are doing this. Coronavirus has hit the workforce hard, with restrictions on employees affecting the Banks and Building Societies in the same way as everyone else. Basically, the levels of business a lender has the ability to deal with is reduced. Their response has been to remove products, thus reducing the incoming business. This has left lots of people without any product options.
The second major point is that physical mortgage valuations have not been possible due to the government guidelines. Some lenders do carry out desktop or drive by valuations but not all.
What does this mean for existing borrowers?
If you’re on a variable rate or tracker product you may not see any change in your monthly payments or interest rate as this is happening so fast the lenders are being very slow to pass the reduced interest rates down the line, this may be due to the significant impact coronavirus has had on their workforce. Some lenders however have addressed this issue by committing to passing on the full reduction to those entitled to it. Other lenders are delaying any change to those product rates, this would suggest they believe the Bank of England see the base rate reduction as a short term measure.
What about new mortgages borrowers?
You could be forgiven for assuming that the reduction in base rate will have an immediate impact on the rates available to mortgage borrowers, but this has not been the case so far. Most lenders have not reduced their rates at all with many withdrawing higher loan to value product ranges entirely, it looks like the risk of higher loan to value mortgages is too much for most lenders at the moment.
Some of the more niche lenders such as Together Money and Vida Home loans are simply not able to obtain money to lend themselves at the moment. They use the wholesale and capital markets which themselves are closed currently. This means these types of lenders are only able to work on existing mortgage applications and are unable to accept new ones.
Is getting a mortgage possible?
Lenders who have made changes have also made it clear that they are expecting these to be temporary due to the coronavirus situation, and are hoping to return to normality when possible.
When money is available to lend and surveyors are able to physically value a property the lenders are likely to revert back to their pre lockdown criteria and product ranges.
What can I do in the meantime?
The main thing to remember is that lenders want to lend money, it’s what they do. The measures they are taking at the moment are in response to the current situation. It is still possible to submit applications and more lenders are opening up higher loan to value products each week.
The main thing you can do is prepare yourself for the mortgage process, get in touch with a broker who can start researching for you, discussing your options and get an understanding of your situation. Check your credit report and make sure you’re in the best position possible when the dust settles.