We investigate what impact coronavirus has had on the mortgage market and give our opinion on whether it is possible to get a mortgage in these unprecedented times.
Recent news headlines stating the mortgage market has been shutdown or gone into lockdown seem worrying. However, from our view the mortgage market is still functioning and banks are still lending. The rules have just changed, and they changed very quickly.
Has the Market changed?
Well, when the UK went into lockdown the valuers who inspect properties for lenders became unable to carry out physical inspections of property. This had a very quick knock on effect. Lenders have for a long time used their own ‘Automated Valuation Model’ or AVM to produce an online or ‘desktop’ valuation so they do not have to send a surveyor to assess the property. They do this on mortgages and property they deem to be low risk. This may mean a mortgage where the applicant has a large deposit and a property in an area where there have been lots of transactions and they have lots of data to use. Therefore lenders have withdrawn the higher loan to value products as they do not fit the AVM model. Different lenders use different AVM models and therefore, depending on the lender they may have capped their loan to values at anything between 60%-90%. Most are capped at around 75%.
Are people still moving home?
Towards the end of March the UK Government urged people to try not to move house in order to try to stop the risk of spreading the virus. Estate agents had to shut their branch doors and work from home. This meant the purchase market slowed considerably. It slowed but it hasn’t stopped. We have clients who are still having offers accepted on property they viewed before the lockdown and transactions are still happening as long as the applicant has a reasonable deposit and the lender can carry out an AVM.
Are Mortgage Lenders still able to process applications?
We do however think there is a backlog of applications building up with the lenders on properties where an AVM cannot be carried out (this could include new build property or property where the lender cannot find enough local data to carry out the AVM). Once valuers are able to carry out valuations they are going to be busy!
How have Mortgage Lenders Responded?
Lenders have been fantastic at how they have adapted to this fast changing situation. They have large processing centers and these have needed to be scaled back as staff work from home. Removing the higher loan to value products has also allowed lenders to take stock, breath and keep a check on case volumes so they can process cases in a timely manner. We have seen the odd delay in processing (of maybe a few days) however most high street lenders have kept things moving and have been working around the clock to make sure they produce offers on time and help clients and brokers. We are quite amazed at how these large institutions have adapted and we think they deserve a round of applause.
Is it worth looking at my mortgage now?
The simple answer is yes. Rates are incredibly low, lenders are still open and there are some fantastic deals available at present for both purchase and remortgage clients. Remortgages in particular are highly competitive and if you are at home and have the time why not save some money on your mortgage. Brokers and lenders can do everything we need them to online and over the phone so there’s nothing stopping us. And there’s nothing stopping you!
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