Mortgages and moving home can be stressful at the best of times, nevermind in the throes of a pandemic and no that non essential travel restrictions came into force last night we wanted to outline what is developing in terms of the Coronavirus and Mortgages.
Our posts on the site have seen a little reduction in frequency recently as we have all been working all hours to try to ensure we could get as many mortgages offered before any lockdown hit – which has now happened.
I thought now would be a good time to explain what has been happening behind the scenes in the mortgage market.
The last 7-10 days has seen quite an upheaval. However, for Mortgage Success we invested in a system last year that would enable us to work remotely so as it happens we are working 100% as normal. The only difference really is that (like many people) I now have to work from home with my 2 year old daughter climbing on top of me when she is not watching Peppa pig.
Lenders have been moving their staff from their offices and enabling them where possible to work from home or “reserve sites” in an attempt to manage the move to non essential travel and maintain social distancing.
This has meant that at certain times what ordinarily may have been a 10 minute job now becomes an all day job as you are leaving messages and waiting for a call back.
Inevitably this has meant that service standards have dropped with numerous lenders, although we are trying to limit this knock on effect to our customers, wherever possible.
An example (although they are by no means alone) of how Coronavirus and Mortgages are being affected is with Natwest, whom would ordinarily take around 48 hours to assess documents, but that has now dropped to around 6 days.
That is just a brief overview of where we are currently at with lenders.
Everyone is working and working hard, but it is just taking longer. It is no single persons fault, it is just one of those things given the unprecedented circumstances we all now find ourselves in.
Specialist Lenders stance on Corona
If you would like narrow this down to specific specialist lenders stance on corona or covid19, we have quickly put together a page to try and help. It is updated as best we can with links to the lenders official pages where possible.
Information is not as forthcoming as we would like at the moment as we are reliant on the lenders making updated available, but hopefully it may be of some help.
If you do not have a specific lender in mind just yet, then the information below is probably more useful.
As mentioned we have been working very long hours to get pending mortgage applications as far as we could before it inevitably hit and we have managed to get all but a couple of applications over to offer.
The applications that have not yet been offered are typically waiting on a valuation to be carried out. Unfortunately we have no news on what will happen on that front.
Up until yesterday lenders were still saying it is business as usual. However looking at the positives, mortgage lenders still need to lend in order to make money so that means it is likely one of 2 things will happen:
- They will revert to Desktop valuations where possible.
- The lockdown rules still allow people to work alone and surveyors do work alone.
I am not entirely sure how surveyors will work going forward. Whether they will want to go to peoples homes. Whether people will want them in their homes, or whether employers will even allow this type of travel and if it will be coniseed ‘essential travel’ and so on.
With what info available now, it makes me think we may see a period of desktop valuations, particularly with lower LTV (loan to valuations) amounts, of under 80% or 75%. This in turn may also help to catch up any backlog and allow things to revert back to normal, but only time will tell on that front.
The good news is that solicitors seem to have been better prepared than mortgage lenders and they seem to be more geared towards remote working and have generally been keeping on top of their workload.
The bigger issue I can see is once all the legal work is done, what happens then?
Is it classed as essential travel, will people be allowed to move? Another one where only time will tell I think and hopefully we should find more out in the coming days.
What happens if my purchase falls through?
I already have a Mortgage
The big thing here in terms of the Coronavirus and Mortgages is that the government has already said mortgage lenders need to be prepared to give individuals up to a 3 month payment holiday if they have been affected directly or indirectly by corona virus.
Now, a few very important things to bare in mind with this offer:
- If you take the holiday, the payments are still due, they are just delayed.
- Interest will still be charged and that has the effect of being compounded. That in essence means you get charged interest on interest. So it will cost you in the long run to take the payment holiday.
- You should only take the payment holiday if you need it. Other than the fact it will cost you, if you take it now and then need it in 6 months time, who is to say you will get another? Best to keep it in your back pocket and save it for a rainy day.
Although again it is still early days here, it appears that the government are throwing a lot of money into the banking system, to keep liquidity up and to try and keep things as normal as possible. They are printing money so mortgage lenders carry on lending as normal.
However, the Bank of England is only really making that money available to conventional banks.
This is having a bit of a strange effect on the rest of the mortgage market and in particular, the bad credit mortgage market, due to the way they source their funds.
Normal lenders, i.e. banks you see on the high street are carrying on as normal, albeit a little bit cautious. So in practice this means they may not really pass on any reductions in the Bank of England Base rate and and I can also imagine behind the scenes they have tightened up on credit scoring so the level of declined applications will probably gradually increase as they tighten their own belts in preparedness for a worsening economic climate.
The other part of the market, such as the adverse or specialist lenders are simply not getting the same level of support from the government currently.
See this link for more info on the latest stance of Adverse Credit Lenders and Coronavirus (Covid-19).
This means they are tightening their belts a little also. They have generally (although not all) pulled some of their products in previous situations such as the credit crunch. However, as of today, all but one of those lenders appears confident they have enough money to remain in the market for at least another 12 months, by which time we hope all of this will be a distant memory.
This feels very different to the recession in 2007, in that lenders still have money to lend, they still want to lend and the government are trying to help everyone (not just banks).
I could be completely wrong but it just feels like the government are trying to smooth this over in order to try and keep it business as usual and it is not just our government it is pretty much every major government around the world.
Nobody really knows what the next 6-12 months will hold in terms of the impact of Coronavirus and Mortgages.
It does seem like everyone wants to get back to normal but obviously we are all affected by external (non economic) circumstances and when it comes to public health and a pandemic, we are in somewhat unprecedented times.
Even though Mortgage Success are doing everything we can to move our customers applications and approved mortgages forward, we also have to abide by the changing Government advice.
We doing all we can to minimise any disruption in terms the Coronavirus and Mortgages whilst we are under the non essential travel restrictions we are and we will communicate directly with our customers, when we have more to tell them as new information becomes available.
Everyone is working very hard to try to get completions through and whilst there probably will be a lull with the lock down, hopefully we can pick up where we left off, as soon as humanly possible.