How hard is it to get a mortgage at the moment?

It’s been a hectic few weeks in the mortgage market.

Some reports could have you believing there was another credit crunch. Fortunately, that’s not the case.

There were initial challenges for mortgage lenders. Mainly these were –

  • Restructuring due to social distancing
  • Managing demand for payment holidays
  • Carrying out valuations on property

Lending Restrictions

In response, a lot of the main lenders reduced their loan to value (ltv) limits. These were initially around 60 – 75%. However, over the last week or so many have increased this to 80 – 85%. Wherever possible, some are using an Automated Valuation Model (AVM) or Desktop Valuations. This can come with challenges, but at least they are looking to lend.

There are some lenders still lending up to 90%ltv. However, as with some other areas like specialist buy to let, it’s likely these applications will remain on hold until the restrictions are lifted. This is because physical valuations will be required.

So how easy is to get these mortgages?

Well, they do come with challenges. For example, people with bonuses or the self employed may find it more difficult as lenders are more risk adverse on affordability.

A positive sign was some of the mainstream mortgage lenders accepting furlough income. However, for a lot of people this may affect affordability.

Lenders have tightened up criteria across the board. To be honest, who can blame them? The good news is that except for a few specialist lenders, they are open for business and looking to lend.

Another issue will be timing. How quickly do you need the mortgage? If you need the mortgage in the next 1-2 months, this could restrict your options. For example, the lender with the best deal may not be able to offer you an AVM / desktop valuation. This means you’ll either have to wait or pick another product (assuming one is available). There could be a cost to this.

There’s no question it’s going to be more difficult then a few weeks ago. However there are still options. There is still choice.

Are people still taking out mortgages at the moment?

Transactions in the purchase market have taken a hit. The good news is that there is still demand. It’s more a case of not being workable due to social distancing and lock down. For example, estate agents can’t carry out viewings. Surveyors can’t go to properties. Government guidelines for conveyancers are restrictive. However, there is still demand.

The demand for Remortgage and Equity Release advice has been consistent. This is mainly a result of people reviewing their finances. They are either looking for a better rate, to save money, raise cash or pay off debt.

So yes, there is still demand for mortgages. We are still submitting applications to lenders. We are still getting mortgage offers.

Transaction levels are lower. This is to be expected given the circumstances. However, there is more activity than we assumed there would be. It may be harder work, but at least there’s something to work with. Long may that continue.

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