As the UK’s third national lockdown continues, borrowers may be uncertain how COVID-19 is impacting their mortgage prospects. Fortunately though, there are some positive signs of recovery in the market as lender activity is improving to meet pre-pandemic levels. Here are some of the changes over the past few months which could benefit you:
Mortgage choice has increased
According to Moneyfacts.co.uk, borrowers looking for a new mortgage deal now have the highest number of deals to choose from since March 2020, just before the UK entered its first lockdown.
With overall mortgage availability rising in January 2021 for the fourth consecutive month, this is a great indication that the mortgage market is improving and provides buyers with more options to help get moving.
With greater choice it is important to speak to a professional mortgage adviser to help you compare the mortgage products on offer and find the right deal for you.
The return of low-deposit mortgages
With mortgage deals at the highest level since March, there is also good news for those with a 10% deposit. The independent Moneyfacts UK Mortgage Trends Treasury Report has reported the number of 90% loan-to-value (LTV) mortgages has increased from 160 products in January to 277 in mid-February (a huge increase of 73%).
The welcome reintroduction of 90% loan-to-value mortgages from many of the big high street lenders, such as Barclays, Nationwide, Halifax, Santander and HSBC, marks a ‘vote of confidence’ in the mortgage market and should give first-time-buyers in particular renewed hope of owning their dream home in 2021.
If you have a small deposit and are unsure about what options might be available to you, you should speak to a professional mortgage advisor. Countrywide Mortgage Services has access to a wide range of 90% loan-value-mortgage deals.
Furthermore, following the government’s 2021 budget announcement, the new Mortgage Guarantee scheme will help existing homeowners and first-time-buyers alike move with as little as a 5% deposit. Through the scheme, the government will take on some of the risks associated with low-deposit mortgage lending, which will hopefully unlock a steady stream of 95% loan-to-value mortgage products in the market. The scheme will be open for new mortgage applications from April 2021 to December 2022.
Lender criteria improvements
As well as increasing their range of mortgage products on offer, lenders are also improving their criteria and thereby helping you get a mortgage – another positive sign that lenders are less risk-averse and are operating in a more buoyant market.
Some of the criteria improvements which could benefit you are:
- Maximum borrowing – increase in the 4.5x salary cap to 5x salary, meaning some lenders will now let you borrow up to five times your salary.
- Increased options for interest-only mortgages.
- Increased options for specialist mortgages for the self-employed.
- Lower mortgage rates in some cases.
This being said, however, 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.
Each lender has different criteria requirements so, 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 rates becoming more competitive
Greater availability of mortgage products in the market breeds more competitive mortgage rates for budding buyers. Lenders are keen to attract and retain customers so offer enticing low-rate products to help save you money on your monthly payments.
Remortgage customers in particular will benefit as fixed rates remain low, in the region of 1.4%, meaning your payments should be less. These deals are changing all the time as lenders return their full range to the market.
Although mortgage rates for 90% loan-to-value products are still higher now than they were at the beginning of 2020, average rates for these products are falling too, so are headed in the right direction.
With the pace of change, it is important to speak to a professional to help make sense of the different options. Remember, attractive low rates aren’t the only thing to consider when searching for the ‘cheapest deal’. You need to look at the overall cost of the mortgage product, factoring in additional fees, lender criteria and the length of time (mortgage term) you wish to borrow for. A Countrywide Mortgage Services consultant can help you understand the overall costs and find the best deal for your individual circumstances.
As this situation is on-going and has never occurred before, there are no guidelines or takeaways from past occurrences to predict the future 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. But with more and more lenders increasing their mortgage product range (including the return of 90% LTVs and Mortgage Guarantee scheme announcements), loosening their lending criteria and offering more attractive low rate deals – the signs of a recovery in the mortgage market are there.