The easing of restrictions and the roll-out of vaccines, means there’s more to feel positive about, and that extends to the Property sector.
Understandably, the last year or so has been particularly difficult, yet throughout this period both the property and mortgage sectors have been open for business.
And the ongoing environment of low interest rates* means that there continues to be a desire by many to buy that first property, buy more properties, or to look at remortgaging the existing deal.
This desire may have been fuelled by many of us reassessing how (and where) we live, in light of our changing working patterns and lifestyle choices. However, the impact of the pandemic has meant that it will be more problematic for some to raise the mortgage funds they need.
If you have a sound income stream, decent credit rating, and want to borrow a lower percentage against the value of the property, then there may be fewer hoops to jump through. Although, even here, it’s still important that you take advice.
Others may benefit from, or fall into areas, such as:
Mortgage Guarantee Scheme
With a launch in April, this UK-wide scheme (largely relevant for first-time buyers, but also for homemovers) was announced in the March 2021 Budget. It’s applicable for all properties under £600,000, and will open up 5% deposit mortgages for those wanting to get their first, or next, residential property.
Additionally, there has been a return of 90% Loan-to-Value (LTV) mortgages*.
However, the overall lending criteria remains fairly strict, and interest rates are creeping up.
The key point to remember here is that about 4.4 million people are self-employed, representing almost one in six of the total workforce of around 28 million (of which 72% are in the private sector).
(Source: Office for National Statistics, Labour Force Survey, February 2021)
Ultimately, lenders will not want to neglect (or penalise long-term) one-sixth of all earning workers, but this group has undoubtedly suffered over the last year or so.
The issue for lenders is that the income stream of the self-employed is less clear cut, and even more so in COVID times, meaning lenders want to:
– see if they are currently trading, or if there was any reduction in their self-employed income due to COVID-19.
– hear if they’re in receipt of the Self-Employment Income Support Scheme, or a Bounce Back Loan.
– be told if any staff have been furloughed.
– see more recent bank statements, as the latest accounts aren’t now deemed enough.
In short, mortgage providers are looking for proof that the business is viable, and to understand how the pandemic has affected the work and income of the applicant.
The Furlough Scheme has topped up the wages of over 11m workers since its launch in March last year, and there are still around 4.7m receiving help. This scheme will now run until the end of September.
Whilst this has delivered a vital income stream for many, different lenders have their own criteria with regard to assessing income and affordability for furloughed workers.
Some lenders, for example, won’t accept furlough income for their affordability assessment, or restrict the LTV offered, whilst others require that the applicant has either returned to work or has a fixed date to return. Furloughed applicants may also need to provide a letter from their employer confirming their basic salary, return to work date and any other terms of return.
Where we can Help
The problems faced in the marketplace have not been brought about by an economic crash, as in 2007/8, but by the initiatives undertaken to tackle the pandemic.
Basically, lenders want to lend, but it’s more problematic to navigate a way through the lending criteria that’s been set. This is not insurmountable, in most cases, and our professional advice can hopefully find a way through for you.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
(Source *Moneyfacts, 8 March 2021)