We have been getting a few questions over the last few weeks since Corona virus took hold, those questions range from how furlough and government grants affect Mortgage applications, through to payment holidays and what about next year for self employed people.
There does not really appear to be answers online and where there are, they are not really straight to the point, so I thought it would be a good idea to get some answers up in order to try and help. I have split them up in to sections:
Current Mortgage holders
How will Payment holidays effect future applications – From everything I have read it appears that there will be no negative markers placed on your credit file because of the payment holiday providing you do it in agreement with your lender. If you just cancel your Direct Debit then it will probably result in late payment markers. You need to speak to your lender directly about payment holidays.
There are no indications that lenders will look at these payment holidays negatively when it comes to remortgage down the line, although time will tell on that front.
Remortgages are readily available up to 80%. Once you go above 80% you start to see your options reduce. If you go above 85% we are down to probably a handful of lenders.
People looking to buy
Similar to remortgages really, 80% LTV and you should see very little difference to how it was previously on the straight forward cases. If you have had credit issues in the last 3 years, you may see a few less options than previously.
80-85% LTV and you still have options but they are limited.
85-90% LTV and you are down to very small numbers and it appears at the moment lenders are launching products and then pulling them a few days later as demand is still quite high for them.
This is the one where we have noticed a big change. The govt grant or furlough (for ltd company owners) is having an affect on options. Lenders are generally wanting either accountants references and/or business bank statements in addition to the usual self assessments.
They are looking for signs of a downturn in business which being realistic is probably a given. However there are signs lenders are beginning to loosen the the reigns on this front a little and are now more concerned with whether the business will bounce back to where it was previously or if there will be longer term problems – a Barbers for example, we would all expect to bounce back straight away.
This is another difficult one, generally speaking if you are on furlough you could struggle, certainly if you need 100% of your income to pass affordability.
You may also find options are reduced further if you have not returned back to work yet. We are seeing a lot of employer references being requested at the moment, more so than ever before.
It is a bit of a bleak picture at the minute, however it appears the worst is behind us in terms of getting a mortgage, although a lot depends on whether there is a second peak and whether or not the economy bounces back.
If either of those happen we could find lenders tighten up again either in terms of criteria/affordability or if the economy does not bounce back then we may find 90/95% LTV mortgages remain difficult to get for the foreseeable.
It looks like the next 2-4 months will interesting and will determine what happens in the mortgage world.