Wow! What a year this has been! One minute everything is fine, then the world goes to pot. Then we are allowed to see friends, then not and then only if it involves us spending money. There is a lot to be said for a nice boring quiet life isnt there!
Surprisingly this year has been our best ever year. We hit that little milestone at the beginning of September. It is quite amazing to say that as we have/had 3-4 months of the year to go and looking back to April when we were sat in the back garden having BBQs and spending time with the family during the lock down I was writing the year off! So I just want to say thank you for all of the support and keeping us busy!
I have been trying to make regular posts on how Corona Virus is affecting the mortgage market for most people – both employed, self employed, those with big deposits and smaller deposits. You can see the previous posts here:
This post is effectively an update to the previous posts as we are a little further along. I do not like to make predictions but I believe this will be the last major update about Corona and any further updates will be based more on the market and the economy… But who knows?
What has changed?
The key changes since the last update appear to be:
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, is everything now 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 and confirmation 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 90% of businesses and has now moved on to whether or not the business is back open and trading and is it viable in the longer term. This is definitely good in my mind as it appears they are no longer worrying about the proverbial spilt milk and more concerned with has normality returned.
This is big news for businesses that have returned to normal. Obviously if things are still slower then it is not much use, but it is important that normality is beginning to return for as many people as possible.
There has not been a lot of change here but what has changed is quite a major shift – although probably to be expected. As the furlough scheme comes to an end, lenders are now not accepting furlough incomes.
If you do not have a return to work date or confirmation your employer will be paying your wages at any level then we are unable to use your income.
Prior to this change as of mid August there were only a couple of lenders accepting furlough income without a return to work date so options have gone from maybe 2-3 down to none, so whilst not a major shift in the mortgage market, with those limited options gone it does make a big difference, although one that is understandable and hard to argue with.
High Loan to Value Mortgages
This has not changed too much since the last update. 95% LTV Mortgages still appear to be a thing of the past, at least for the foreseeable future. 90% Mortgages are still hit and miss at the minute although there has been some slight changes in the 85-90% LTV market…
90% LTV Mortgages still tend to fall into one of 3 categories:
Short bursts – This is where a lender launches a product which is available for maybe 2-7 days. This is great if they are available when you need them as they are typically well priced, the same criteria as always and for all intents and purposes a normal 90% Mortgage.
Come with Caveats – What other lenders have decided to do in order to stem the flow of business is offer them but with extra caveats. For example, you might only be able to get a maximum 25 year mortgage (rather than 30-35 years they could offer on 85% LTV) or they may be limited to first time buyers.
Poorer choice of products – 90% products are typically rates of around 3%. An 85% LTV Mortgage by comparison would be around 1.8%. What many lenders are offering are 90% Mortgages but with a tie in period of 5-10 years. It means you can not take advantage of paying down your mortgage and/or increase in property prices to remortgage to a cheaper rate in 2-3 years time and so you are stuck paying a higher rate for a longer period.
Long delays – With the likes of HSBC who have 90% products at good rates and normal criteria on the face of it are going to be the first choice for many, but there is around a 30 day waiting time just to get an appointment with them. That may not be so bad if a remortgage, but if you are looking to buy, it is unlikely an estate agent or vendor will be prepared to wait that long just to get the ball rolling.
Although there are options at 90% LTV pretty much all of them rely on some sort of compromise, either in cost, criteria or waiting times. If you compare this with where we were 3 moths ago however, it is a massive improvement and it could be the difference between getting on the property ladder or not, if nothing else it is still more choice than was available just after the lock down was lifted.
Bad Credit Mortgages
This is important for us as it is where we tend to specialise so it affects us more than say 95% LTV mortgages not being available.
The bad credit part of the market has pulled back considerably from where it was in February. 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.
2 lenders have come back to the market since pulling out when Corona virus hit, the most recent of those came back at the beginning of the month. It does not seem to have had much impact on the rest of the market and these lenders all seem content to sit around the 75-80% LTV range meaning you need a 20-25% deposit if you do have a lot of credit issues or recent issues.
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 rather than carrying on as normal. There are some exceptions to this but it is more a case that it needs to be assessed on a case by case basis.
In short, there has been a lot of changes over the last 6-7 months. The dust appears to have finally 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 any future lock downs. 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 so hopefully the mortgage world has put the worst behind it.
I will keep an eye on things and make a new post as and when we see any trends in our industry.
*This post was written over the space of a couple of weeks and was correct at time of writing.