In the past few weeks the situation has changed massively. We’ve seen a bank rate cut, and along with it a cut in interest rates for those on tracker mortgages. Major lenders have also begun to offer 3-month mortgage payment holidays for anyone who is struggling financially as a consequence of coronavirus.
On the other hand, the government has provided guidance which restricts personal movement in order to prevent the spread of Covid-19. The introduction of these restrictions, means it is now very difficult for estate agents, surveyors and conveyancers (whose work depends greatly on in person meetings) to conduct their work as normal. This has a large knock on impact for mortgage lenders.
A house acts as security against a mortgage loan. This means that your home must be worth the same amount or more than a bank lets you borrow against it. If you don’t keep up your mortgage payment your lender can take over your house, and will not have lost any money. Mortgage lenders therefore rely on the advice of surveyors to provide an accurate valuation, and inform their decision. If surveyors are unable to conduct valuations as normal a lender has less information on which to make their decision. This makes lenders more cautious, and less willing to offer large LTV (loan to value) loans.
Some banks have already taken action to reduce the amount of mortgage options available. Lloyd’s Banking Group and Barclays have both temporarily stopped offering many of their mortgage products. Lloyd’s will now require buyers to have a deposit of at least 40% of the value of the property they are buying. Making mortgages more expensive means they are more difficult to get - you’ll need to produce a much larger upfront amount, and show that you are able to afford the monthly payments.
We expect to see banks introducing more similar measures over the coming days, and we will update this page as soon as we receive more information.
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