We’re often asked, how hard is to arrange a mortgage at the moment? We answered this during previous lockdowns, so what’s the answer in Lockdown 3?
In January, the Prime Minister announced lock down restrictions with instructions to ‘stay at home.’
People in the property industry were quick to clarify that the housing market will remain open during lockdown 3.0.
There wasn’t a massive impact in terms of working practices for brokers, lenders and solicitors. These had already been implemented during previous lockdowns.
However, there can still be delays. We mentioned this when we answered ‘how hard is it to arrange a mortgage at the moment’ in November. Working practices and the stamp duty holiday caused a demand / supply imbalance which in turned caused delays. These service issues are still a challenge for many lenders and solicitors.
In spite of the challenges, there are signs that mortgage lenders have confidence in the market moving forward.
In October, we reported concerns around the lack of 90% ltv mortgages. Shortly afterwards, in an update on 90% ltv mortgages, we were pleased to report a few more options being available.
At the time of writing, we are pleased to confirm that there are over 120 90% ltv mortgages available from over 25 lenders. This includes 90%ltv joint borrower sole proprietor mortgages.
90% ltv mortgage lending is invaluable for first time buyers, home movers and people looking to remortgage.
Compared to previous lockdowns, the fact that there are many lenders looking to offer 90% ltv could be seen as an indication of confidence moving forward.
The same could be said for buy to let mortgages.
During previous lockdowns, the number of buy to let mortgage products available significantly reduced. In addition, loan to value (ltv) restrictions meant that many landlords required more equity in order to obtain the mortgage they needed. Many lenders also implemented restrictions on tenant type i.e. no accepting student lets, HMOs or multi unit blocks.
In recent months we have seen changes. Moneyfacts reported an increasing number of high ltv BTL mortgages showed optimism in the sector. This refers to 80% ltv BTL and although numbers are lower than January 2020, they are on the rise.
Unfortunately, according to the report, BTL mortgage rates are also slightly increasing. However, as the market becomes more competitive, hopefully this will change.
Mortgages for small business owners and the self employed can still be tricky.
As an example, a self employed professional in the medical industry came to us having been agreed in principle only to be refused post application. There were no changes to their circumstances, the underwriter simply used their discretion and declined based on not knowing what the future might hold. If this is the approach, there’s an argument for not lending to anybody at the moment so they may as well close. Fortunately we were able to put the client with a high street lender who adopted a common sense approach.
By contrast, we have helped another client who owns a Cafe, made a loss last year and needed to use profits (rather than salary and dividends) for the current year. Given the industry and uncertainty at the moment, this was a challenge. However, we were able to secure a mortgage as the client’s could prove they are still profitable (as they offer a take away service) and we could provide projections from their chartered accountant.
In short, lenders are still lending to self employed applicants, but you need to know where to look and how to put the case together.
The demand for Lifetime Mortgage advice remains consistent. Due to the changes made by the Equity Release Council around legal requirements, people can now get the advice and mortgages the need.
As people become more educated in this sector, they realise that Lifetime Mortgages can be used in many ways. Our case study this month looks at a client who is using a lifetime mortgage instead of cashing in investments.
Lifetime mortgages are becoming more mainstream. The horror stories of people losing their homes or going into negative equity due to rolled up interest are becoming a thing of the past. Read our guide to later life lending for more information.
In summary, there are still challenges in terms of timescales, but at least the fundamentals are there.
Rates are still competitive, product numbers are increasing and so are ltv limits. This indicates that lenders have confidence in the sector, however it’s more important than ever to seek independent advice in order to save time, effort and money.
If you have an enquiry, please get in touch for impartial, obligation-free advice and we’ll be happy to help.