We made a post around 6 weeks ago about what it was like trying to get a Mortgage since Covid hit. 6 weeks is a long time and there has been some changes, the dust appears to have settled and there are still tweaks to lenders products/criteria and rates almost daily.
The Key changes in this new Mortgage world are:
Self Employed – This is by far the biggest change and one that is causing us a lot more work. Self employed applicants can still get Mortgages, but your options will vary depending on:
- Whether your business has been affected by Covid-19,
- If it has been affected, are there signs it is getting back to normal,
- Did you put yourself on furlough if a Ltd Co director or claim the grant if a sole trader,
- Have you applied for the Bounce back loans.
We are finding that lenders are generally wanting at least one of the following in addition to the normal requirements:
- 3-6 months business bank statements to show money is coming into the business,
- An explanation of where the business is at, whether it is viable going forward,
- An accountants reference.
The concerns seem to have shifted from whether there was a downturn in business as it is pretty much a given that there would have been for 99% of businesses and has moved on to whether or not the business is now back open and trading and is it viable in the longer term.
Not too much has changed here, however if you are still on furlough your options are reduced significantly. Aside from that, it is generally the same as normal with the exception of bonuses, overtime and commission income which I have explained further below.
High Loan to Value Mortgages
95% Mortgages appear to be a thing of the past, at least for the forseeable future. 90% Mortgages are also very hit and miss at the minute.
The 90% Mortgages available tend to either come and go in short bursts, as an example Coventry Building Society have done a number of 90% products where you have to apply within 48 hours or miss out. This works out well if they are available when you need them as criteria is the same as it always has been and rates are generally pretty good.
Other lenders, Nationwide for instance have launched 90% products that come with a few extra caveats, for example they will only allow you to take the mortgage out over a maximum of 25 years, where as 85% you could do over 35 years.
Other options appear to be the likes of HSBC who have 90% products at good rates and normal criteria but there is around a 30 day waiting time just to get an appointment with them. There are also lenders like Accord who are offering 90% products but at higher rates and with a longer tie in period (typically 5 years).
So as you can see there are options out there at 90% LTV but pretty much all of those deals have drawbacks in one way or another. Compared to where we were as little as 6 weeks ago however it is a big improvement on the higher LTV front. In an ideal world though, you would still be looking at a 15% deposit. However as whole of market Mortgage brokers, we can do the research to see what is available for you.
Bad Credit Mortgages
This is the big one for us, we do a lot of adverse credit mortgages so this is the one we have noticed the most.
The bad credit part of the market has pulled back, generally speaking for medium/severe credit issues (typically any issues beyond the odd late payment in the last 3 years) has pulled back to 75% LTV rather than the 85% LTV it was at in February. However, we are finding you can get bad credit mortgages up to 80% at near normal rates if your adverse is generally over 3 years old or has been satisfied for 2 years.
There are signs this is and will be improving and with the likes of Vida home loans expecting to return later this month, it will be interesting to see what effect this has on rates, LTVs and products available. I am not sure we will see 85% LTV products with adverse in the last 3 years before the end of the year, but who knows – it is always worth having a chat as things are changing regularly.
Overtime, Commission & Bonus income
This is another big change we have seen, although it is easy to see why it has happened. Generally speaking using anything beyond a basic wage is quite difficult in the current climate. Simply because the next 12 months could be rocky, if you are getting overtime/commission and bonuses at the minute, there is a risk it could be because you are working for a business or in an industry which is benefiting from Covid-19 and its effects.
In short, there has been a lot of changes over the last 5-6 months. Generally speaking however the dust has settled and I think we have found a level which lenders are happy with and so hopefully that should mean we have seen the worst of the changes in our industry.
In the longer term, I would like to think things can only improve but that is probably more likely to be next year and dependent on how the economy pans out and the virus. There are obviously plenty of signs that people want to carry on as normal and whilst that might not be a good thing for reducing the virus, it is good for the economy.
I will keep an eye on things and make a new post as and when we see any trends in our industry.