Mortgages And Covid-19
The current pandemic has had a huge effect on all elements of the UK economy including the housing market. As restrictions will at some point start to lift, we look at what this means for you and your mortgage.
How Did Lockdown Affect Mortgages?
According to Experian the coronavirus lockdown affected mortgages a few ways.
- Mortgage approvals fell – due to lenders being unable to carry out physical valuations of properties.
- Lenders tightened their lending criteria – many increased the deposits they require for their mortgages.
- Some lenders pulled mortgage deals from the market because of the uncertainty. This limited options for customers.
- Mortgage holidays boomed – over 1.6m homeowners took a break from repaying their mortgage.
- Interest rates fell – the Bank of England cut the base rate to 0.1% and mortgage interest rates fell.
However, more recently, the number of mortgage deals on the market has risen and we now have the highest level of options available since the start of the pandemic. Conveyancing Store explains what is happening to the market and considers whether it really is becoming easier to get a mortgage and if so, why.
Mortgage Availability
Mortgage Availability has been improving for four months now, providing a boost to both home buyers and remortgagers alike. There are currently more deals on the market than there has been since last March. In fact, the number of mortgages on offer has risen by 42%, with offers of low-deposit 90% deals being a driving factor.
As for mortgage rates, the increased availability hasn’t made them cheaper. Rates are still rising slightly, with two-year deals continuously on the increase. Saying that however, the speed of the increase is slowing down. Lower rates could be on the horizon.
It’s always a good time to compare conveyancing fees online and discover who provides a trusted and efficient service.
How Has Covid-19 Shaped Demand?
Here are some of the ways according to the financial times, in which Covid-19 has shaped demand for mortgages:
- According to 79% of brokers, flexible lending criteria is now a bigger priority for customers than before the start of the pandemic.
- Other factors which have significantly increased in importance are customer service (63%), speed (60%) and flexible product features (55%).
- On the other hand, 56% of brokers said that low rates are no more important now than before Covid-19 and 54% said the same about low fees.
- This emphasis on flexible lending criteria could be attributed to the fact that 92% of brokers said that their customers had been negatively financially impacted by Covid-19 in the second half of 2020.
- Over a quarter of brokers (26%) say they expect to see more business in 2021 from borrowers who have been financially impacted by Covid-19, whether that involved taking out a mortgage payment deferral, being furloughed or being put on the Government jobs support scheme.
- An additional 20% said they expected to see more business from borrowers with an impaired credit history.
- 57% of brokers said that homebuyers are now prioritising bigger houses to allow space for home offices and 33% saying that their customers were prioritising a move out of a city to a quieter area.
- Close to a third of brokers (32%) said that more outdoor space was the priority for their customers.
What Is A Mortgage Payment Holiday?
A mortgage repayment holiday is when your lender allows you to stop making repayments on your mortgage for up to a few months. The pandemic has resulted in one in seven mortgage holders in the UK acquiring a mortgage payment holiday.
Approval from your lender must be sought first to avoid being charged late payment penalties and ruining your credit rating.
A mortgage repayment holiday isn’t free. While you aren’t making repayments, interest on what you owe still accrues. This means when you start paying again either your monthly repayments will rise to pay off the extra interest you owe, or it will take you longer to clear your debt.
Low Deposit Mortgages
First-time buyers have been hard hit by the COVID-19 mortgage situation but 90% mortgages have recently enjoyed a resurgence. However rates remain high, with the cheapest two-year fix around 1.5% higher than before the pandemic.
Mortgage Deals And Length
Mortgage deals are lasting longer than before the onset of COVID-19. The average length of a mortgage deal was previously 56 days. This decreased significantly over the course of 2020 and fell to just 30 days by July and 28 by the end of the year. This happened because banks struggled with resourcing issues and high demand.
It seems, however, that mortgages are staying on the market for longer at the moment, at an average of 40 days currently.
Your local Conveyancing Solicitors will be up to date with mortgage news. Compare conveyancing fees online today.
Is It Getting Easier To Get A Mortgage?
Whilst greater availability and choice of longer lasting deals is good news for borrowers, it remains a complicated time to get a mortgage. Whilst lenders are starting to ease the stringent rules they brought in during 2020, there are still some stumbling blocks.
Many banks are still reluctant to offer long-term deals and you might need to pay a higher up-front fee than before for the best rates.
With this in mind, it may make sense to take advice from a whole-of-market mortgage broker about your options before applying for a mortgage.
Compare Conveyancing fees online . Conveyancing fees quotes may vary depending on the complexity of your purchase, where you live and the conveyancing solicitor choose.
