First published 17 April
- From Wednesday 13 May mortgage valuations, property viewings and home moves can resume in England
- Mortgages are still available, despite the disruption caused by coronavirus
- Some lenders temporarily stopped offering mortgages that require smaller deposits – but these deals are returning
- Mortgage lenders are offering payment freezes for customers financially affected by coronavirus – but interest is still charged during any payment holiday
- Interest rates have been cut to 0.1%, lowering costs for borrowers already on tracker rate and some variable mortgages
Looking to buy?
If you are just starting your search, the most problematic effects of coronavirus will be behind you. The government permitted the housing market in England to ‘reopen’ for business from Wednesday 13 May which has made property viewings, surveys and physical mortgage valuations possible – as well as the house move itself.
Estate agency branches have also been permitted to open.
However, you will find much fewer mortgage deals choose from than before coronavirus. This is especially the case for first-time buyers with smaller deposits, as many lenders have pulled what they deem to be higher-risk deals. Where these mortgages are available, you may find interest rates are higher than pre-coronavirus.
If you had mortgage already agreed before coronavirus, your offer should be valid for between three and six months depending on the lender.
If you had already exchanged contracts on a new home and your completion was delayed due to coronavirus, all lenders are offering mortgage offer extensions for three months – and some, such as Barclays, for up to six months. You will need to disclose any change in circumstances though, such as a fall income due to being furloughed.
Looking to remortgage?
You can still remortgage your home, despite the disruption caused by coronavirus. But with limited resources and lenders busy processing mortgage payment holidays, it might take longer than usual – particularly if you want to make changes to your borrowing amount or your mortgage term.
If you don’t need to make changes to your borrowing amount or mortgage term, switching to a new deal with your existing lender – known as a ‘product transfer’ – could be the quickest way to get onto a better deal.
While there are fewer mortgages available, the fall in the Bank of England’s base rate in March to 0.1% has meant that mortgage rates are exceptionally low. This is especially the case if you have a substantial deposit or chunk of equity in your home.
You can find out what remortgage deals are available at our tables.
Remember, if you don’t take any action, you’ll usually automatically be reverted onto your lender’s standard variable rate (SVR) when your existing deal ends. An SVR could work out significantly more expensive than your current monthly repayment.
If you need advice contact an independent fee-free mortgage broker such as our partner, London and Country. Their team has up to the minute information and will help you find a mortgage that’s right for your circumstances.
Looking for a mortgage payment holiday?
On 17 March banks agreed with the government to offer a three-month payment break for those struggling to make repayments due to coronavirus – the first of which would be due to end in June.
Regulator, the FCA has now proposed this should be extended until 31 October.
This means if you are coming to the end of a payment holiday and are still struggling, further payment breaks could be available until that date. Or if you have yet to request a payment freeze, this is the new deadline for doing so.
The new rules are currently proposals – but they are likely to be implemented soon after 26 May.
Any payment freeze agreed is likely to take two forms:
- it’s added to the total amount outstanding, leading to a small increase in monthly payments for the rest of the term
- the term itself could be extended.
Either way, interest will still be charged during the payment holiday and added to the outstanding amount.
Here at MoneySuperMarket we have built a free mortgage payment holiday calculator to help you work out how much the extra interest will increase your mortgage repayments by once the pay freeze comes to an end.
Who is eligible for a mortgage payment holiday?
You won't need to actively demonstrate that coronavirus has impacted your finances. But you'll need to answer all questions in your application truthfully and be up-to-date with your repayments.
If you don’t wish to take a full payment holiday, you may be able to reduce your monthly payments for a certain period.
Contact your lender directly for more information.
Note that if you are a landlord with a buy-to-let mortgage you are also eligible for a mortgage payment holiday if your tenants are unable to pay their rent because of coronavirus.
Will a mortgage payment holiday affect my credit rating?
If you agree a payment holiday or a payment reduction with your lender, there should be no negative impact on your credit score as you will not have “missed” a payment without prior arrangement.
But our credit score partner TransUnion says that you should always make sure your lender records it properly on your credit file.