Insights

Following upon the devastating impact of Covid-19 in recent weeks, the UK Government together with the Financial Conduct Authority and UK Finance (the body representing the majority of Lenders) have put in place a number of measures to help during these unprecedented times.

Banks, Building Societies and Lending Institutions are re-assessing their mortgage products and in particular, the level of risk involved.

A number of mortgage products have been withdrawn recently, particularly those with higher loan to value rates, It is thought therefore, that people borrowing in excess of 75% may find issues in obtaining finance. In addition many buy to let products have been removed.  We are aware of instances of applications having been frozen for a number of reasons including uncertainty and practical reasons including the inability to have properties valued by surveyors. People moving home appear to pose a greater risk to lenders with some lenders only offering advances to people re-mortgaging. This comes following the temporary closure of the Registers of Scotland application record, the implication being that lenders will be unable to register their interest in a property. Not only is the financial risk preventing lenders lending, there is a reduced desire to move property with guidance from the Government and the Law Society of Scotland encouraging people to put property transactions on hold where at all possible.

To help those in the process of purchasing lenders are generally extending the validity of current loan offers for up to 3 months to ensure they do not expire during the “lockdown” period allowing purchasers to move home when it is safe to do so.

This comes at a time when the Bank of England’s base rate has been reduced to just 0.1%. If you do need to take out a mortgage in the near future or you are on a product which is due to come to an end, it is advisable that you seek independent financial advice to obtain whole of market advice in respect of the products currently available. For those with a mortgage already, it may be a good time to consider re-mortgaging if possible, particularly if you can find a deal which benefits from the lower interest rates.

Home owners who are financially impacted by Covid-19 may be able to apply to their mortgage lender for a payment holiday for up to 3 months. Many lenders offering such holidays have set up straightforward online applications which in many cases can be completed in minutes. It should be noted that interest will continue to accrue on any balance outstanding and monthly payments may increase when they recommence, thus it is important to ensure that anyone considering this option is aware of the long term consequences of such a holiday.