These are interesting (and trying) times. With the daily changes to our everyday life and the ever-increasing pressure on our livelihoods, many are looking at their biggest debt – their mortgage – and trying to work out the best thing to do.
One of the positive actions we’re seeing from the UK Government is that they’re putting in place a robust support structure and the promise of financial support for business, which will in turn (according to the Chancellor) save jobs and keep the economy stable.
This is because they see this issue as a short-term shock and that they need the businesses to continue to employ so that they’re ready for the recovery the other side of the COVID-19 pandemic.
You can find out more about the Government’s support for UK businesses during the Coronavirus pandemic here.
Although this is encouraging for the business world, it will take time to filter down to the employees and many are looking at their own finances to see where they can be sensible to plan ahead, or in some cases – batten the hatches as they’re unable to work for some time.
So, what about your mortgage? What options do you have?
Mortgage payment holidays
What’s on offer? A 3-month mortgage holiday is offered by lenders. The FCA are suggesting that this may be extended.
A holiday in your mortgage payments will be good news to those struggling as the UK goes into lockdown, but here’s what it means to you, should you apply now for a mortgage holiday.
This doesn’t mean you don’t ever have to make the payment. You’ll still have to pay it; it’s just spread over the remaining term of mortgage, or three added payments at the end of your mortgage term.
It’s important not to cancel direct debits. Don’t cancel your Direct Debit or allow payments to bounce without your bank or mortgage lender’s prior permission. This would be recorded on your credit file and may cause you problems in the future.
Buy to let mortgages are now also being offered a mortgage holiday. But… it’s not quite as simple as a standard mortgage. All lenders view it differently. Where some were initially wanting to know whether you had been affected by coronavirus before they agreed, some just gave a blanket “yes” answer.
We are happy to give specific guidance on this areas, at no cost, whether we’ve arranged your mortgage or not – Contact us here.
How will lower interest rates affect my mortgage?
The Bank of England base rate has fallen to a record low of 0.10%. This is great news for those on base rate tracker mortgages, as you’ll see your payments fall.
But just remember, they will rise again, although no one knows when that will be.
Many clients have asked us if fixed rate mortgages are also going to drop. Unfortunately, we feel the opposite is likely to happen. Due to the thriving economy, lenders have been undercutting each other over the past couple of years, with 5-year fixed rates now as low as 1.39%! *
With that in mind, now may be the perfect time to look at your mortgage. Many lenders are dropping their standard variable rates (SVR) which you may think is good news, but if the new rate is over 3%, you could well make quite a saving by looking to re-mortgage.
Some lenders have mortgage offers which are valid for up to six months, so even if your current mortgage doesn’t end until later this year, you could secure a new rate now whilst they are low, and wait for your current deal to end, hence not incurring any early repayment penalties.
Change of job?
At this unusual time there will be some inevitable changes that come as a shock, but there might also be some changes that are welcomed and seen later down the line as a positive change overall.
Many jobs will change and develop and with the surge to working online there are lots of new possibilities out there.
That said, with many employers making quick decisions due to the current climate, there were reports of redundancies and job losses, although (with the word most of us never knew of, but is now known by all it seems ) the furlough scheme, will hopefully see a lot of jobs saved.
The good news if, if you do change job now, or in the future, some lenders will lend based on a job you haven’t started yet, as long as they have a contract and your start date is less than three months away. Dispelling the myth that you need three months payslips before you can apply for a Mortgage.
It’s time to assess your options…
All is not lost, and there may well be some interesting opportunities in the market over the coming months. One thing’s for sure right now – nothing is certain and the mortgage world is changing constantly, which is why we keep up-to-date with all the latest developments.
Need some help and advice? Contact us now. We’d be very happy and well placed to help you.
Your property may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage
*Based on £300k house value, £150k Mortgage on capital repayment over 25 years, 60 months fixed at 1.39% and £592.18 per month, then 240 months at variable rate currently 3.74% and £734.64 per month. APRC 2.95%