In recent weeks, the coronavirus pandemic has affected almost all areas of the economy. From retail to financial services, many businesses have been forced to close or significantly reduce their workload to deal with remote working and social distancing guidelines.
You may have read that the mortgage market is effectively closed for business right now. However, if you’re coming to the end of your existing fixed or tracker rate deal and you’re looking to remortgage, there are still plenty of great deals available.
Sitting on your lender’s Standard Variable Rate (SVR) for any period of time can cost you a significant sum. So, here’s how you can switch your home loan during the coronavirus pandemic.
Thousands of remortgage deals still available
If you were planning to remortgage in the coming months, you may be worried about your options due to the coronavirus pandemic.
While many lenders have stepped back from the market – the total number of mortgage products available has almost halved during the lockdown – there are still hundreds of excellent deals out there.
Research from financial analysts Moneyfacts has found that mortgage rates have fallen following the Bank of England’s decision to reduce the Base rate twice in March.
We’ve previously looked at the impact the Bank’s decision to cut interest rates to just 0.1% has had on your mortgage, but it’s also seen the average two-year fixed-rate mortgage deal fall from 2.43% at the end of March to 2.22% on 7 April 2020.
The average five-year fixed rate has also reduced sharply during the same period, from 2.74% to just 2.5%.
Moneyfacts reports that the most competitive remortgage rates available right now are at 60% loan-to-value (LTV) and below. However, if you’re looking to borrow up to 80% LTV you can find two-year fixed rates at under 1.5%.
Lenders adapting their valuation process to deal with social distancing
One of the major issues that lenders have faced in recent months is that they have been unavailable to conduct physical valuations.
Remortgages often require a surveyor to carry out a physical inspection of a property. As all non-essential work has been banned during the lockdown, surveyors have not been able to undertake the valuations the lenders require.
However, in recent weeks lenders have begun to adjust their processes to overcome some of the barriers.
Many lenders are using Automated Valuation Models (AVMs) to estimate the value of homes. This can make the process more efficient as it avoids the need for a surveyor visit to the property.
AVMs use different data sets, such as the price of homes in the local area, to calculate a valuation and confidence level in that valuation for a property.
Each lender has its own rules on what they will use an AVM for. Most restrict the maximum loan-to-value (LTV), while others may not accept properties of non-standard construction, high rise properties, flats and maisonettes.
As a guide, Moneyfacts reports that the UK’s ten biggest lenders all use automated valuations on residential mortgages and eight of these will use this on remortgage applications of up to 60% LTV.
The Telegraph reports that Virgin Money and Clydesdale Bank are two of the most recent banks to use remote valuations to lend up to 75% of a property’s value. Nationwide has said it would now lend to customers with a 15% deposit, while, in some instances, HSBC said it would lend up to 90% of a property’s value without a physical valuation.
Henry Jordan, Nationwide’s director of mortgages, said: “We continue to focus on supporting existing mortgage members and customers and ensuring that ongoing applications can be processed as quickly as possible.
“However, as the UK’s second-largest mortgage lender, it is right that we still play an active role in the market, while maintaining the levels of service expected of us, during what are unprecedented and evolving times.”
Underwriting adapting to the current situation
As well as changing the process for valuing homes, lenders have also been adapting to the new economic situation in the UK.
If you’re one of the millions of workers who have been furloughed or seen your income reduce, you may have thought that a lender would not take your circumstances into account and that it was a waste of time applying for a mortgage now.
However, some lenders are taking a pragmatic and sympathetic approach to borrowers whose income has been affected by the economic shutdown.
While a lender will want to know if your income has been affected by the coronavirus, it doesn’t mean that you will be turned down. Even if you have been furloughed, some lenders will take your full income into account if you can prove that your employer is ‘topping up’ your salary.
In addition, many banks and building societies are prioritising NHS and front-line staff for remortgages, in order that they progress smoothly and that these vital workers don’t face additional stress during the process.
Get in touch
If you’re planning to switch your mortgage, there are remortgage deals available. We can help you to find the right product and the right lender for you, even if your circumstances have temporarily changed.
Email firstname.lastname@example.org or call (0207) 808 4120 to find out more.
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