Almost every industry has been impacted by the coronavirus crisis in one way or another, and the housing market has taken one of the biggest hits over the last twelve months. With a new national lockdown and few answers about when it will come to an end, there still remains uncertainty about the mortgage market.
Longer Approval Times
On average, it takes about 10 days for a mortgage to be approved once it has been submitted to the lender, however, it currently takes around 20 days for a mortgage to be approved, so if you’re hoping to buy a house before the stamp duty holiday deadline on 31 March 2021, make sure you allow plenty of time for approval.
Low Deposit Mortgages
Towards the end of 2020, low deposit mortgage deals started to disappear from the market due to the coronavirus crisis. In September, MoneySavingExpert found that there were just twenty standard deals available to those with a 10% deposit, though the majority of these were long-term fixed deals that kept buyers locked in for up to 11 years. They also found that there wasn’t a single standard mortgage deal available to first-time buyers with a 5% deposit.
These are fractions of the number of low-deposit first-time buyer deals that were previously available at the beginning of 2020 when there were 751 deals for those with a 10% deposit and 386 deals for those with a 5% deposit.
The size of the deposit is the percentage of the cost of the house the borrower must pay upfront and the mortgage lender. Mortgage brokers and lenders often express this as loan-to-value (LTV). For example, an 85% LTV would mean you would put down a 15% deposit and borrow 85% from the lender.
On the 6th January, HSBC announced they would be reintroducing mortgages at 90% LTV from Tuesday 12 January 2021. Following months of few low deposit mortgages, this comes as a welcome decision for many first time buyers. The bank confirmed they will offer a range of two and five year fixed rate options up to 35 year terms and customers may be able to borrow up to £400,000. The mortgage rates were announced on the 12 January.
The 90% LTV mortgage rates include a two year fixed rate deal with a £999 fee at 3.69% (3.99% no fee) and a five year fixed rate with a £999 fee at 3.84% as well as a two year tracker rate of 3.79% (£999 fee).
Michelle Andrews, HSBC UK’s Head of Buying A Home, said:
“I am pleased and proud to announce that we will be re-introducing mortgages at up to 90% LTV. These mortgages build on our significant support for brokers and mortgage customers throughout 2020 and will be available across the board – for home purchases, first time buyers and to those remortgaging – all up to a maximum of 35 years.
The new lockdown will undoubtedly present challenges, but the experience of overcoming numerous difficulties during the original lockdown, for example making more use of automated valuations, will be invaluable. We are all seeking a return to normal, although for many it will feel like we may not see that for a while. With us returning to the higher LTV space, hopefully that is a little bit of welcome normality.”
Mortgage Payment Holidays
Back in March 2020 when we entered the first national lockdown, the government announced a three month mortgage payment holiday, allowing those who were unable to pay their mortgage due to coronavirus to apply for a break on their payments.
On 22 May, the scheme was extended, allowing homeowners to request another three month extension on their mortgage payment holiday. In preparation for entering the second national lockdown that began on 5 November 2020 and ended on 2 December 2020,, the government extended the mortgage holiday on 31 October 2020 that allowed those who had not already applied to apply for a 6 month payment holiday.
A mortgage payment holiday is a break in paying your mortgage that you can agree on with your lender. If you do take a payment holiday, you’ll have to make extra repayments in the future and interest will accumulate during the break, meaning you’ll actually pay more in the long run. You may ask your lender to reduce the rate of interest during the holiday but they don’t have to agree.
How to get a mortgage payment holiday
You are able to apply for a mortgage payment holiday if you:
- Cannot afford your monthly mortgage repayments
- Haven’t already had a 6 month mortgage payment holiday
If you have already had a 6 month payment break and are still struggling to afford your repayments, your lender may be able to offer tailored support instead, just make sure to get in touch with them as soon as possible.
You won’t have to prove that coronavirus impacted your finances but you will need to have been up to date with your previous mortgage repayments. This shouldn’t affect your credit score though it is worth checking with your lender first.
The maximum holiday you can receive for coronavirus is 6 months, so if you’ve already had a 4 month payment holiday, you’ll only be able to apply for a 2 month extension.
Already Had a 6 Month Extension?
Unfortunately, you won’t be able to get another extension under the coronavirus term, however, you can still request tailored support from your lender. For example, they may be able to:
- Deter your payment for a short time
- Extend lower payments for a short period
- Extend your mortgage term
- Defer interest payments
- Transfer you to an interest only mortgage for a certain period.
For more information and advice when it comes to mortgages, please don’t hesitate to get in touch for a chat with one of our friendly team members at Ryans who will be happy to help answer any questions you may have.