Rob Starr, CEO of Seico Insurance & Mortgages Ltd, offers his insight into the effect of Coronavirus on the mortgage market:
“Recent days have seen a response from both the Government and mortgage lenders to help borrowers during the Covid-19 outbreak and anyone with an existing mortgage should take note – if the help is there then take it. Do not worry about what you can’t change, and do not bury your head in the sand – your mortgage lender does not want to repossess your home and the government agencies will not point the finger at and call you a poor credit risk in the future just because you took the help offered to you during this most unusual world crises.”
So, what is on offer today?
Firstly, a three-month payment holiday has been announced for all lenders that are members of UK Finance and the Building Societies Association (BSA), along with a freeze on repossessions.
In other words your Mortgage Lender can offer you a payment holiday of up to three months without the need to assess your personal circumstances and applications can be made on a self-certification basis. This means that YOU do qualify. I would stress that you need to talk to your lender to arrange this, so it is down to you to make that call or send that email. If you are already in arrears on your mortgage then your lender may need to look at alternative options for you.
If you apply this same principle to a rental property you own rather than your private house, then the government wants landlords to pass on the relief to their tenants during this period. That seems morally correct to me and I think most decent people would do that anyway. You would in most cases need your tenant to work with you on this as they will need to confirm that they cannot pay the rent due to their own personal circumstances.
One thing to remember however is that if you take a payment holiday the money is still owed to the lender and the interest on the mortgage still accrues during the payment holiday. At the end of the payment holiday the lender will be in contact to assess circumstances and agree a manageable way to repay the interest charges incurred and make up the deferred payments. Each lender will have a range of options to do this.
Another option which some lenders are offering, and others are likely to follow suit, is to allow you to switch from a full Repayment mortgage to an Interest Only mortgage for up to 12 months. This would mean that for that period no capital is being repaid and that means a potentially longer mortgage term at the end, which means more interest being paid to the lender over a longer term. However in times of distress reducing your mortgage payments to interest only could be the difference between you keeping your household afloat or not. The reduction in monthly payments can be huge, sometimes reducing your payments by up to 50%. This may not be everyone’s choice and one should consider the fact that your mortgage may go on longer than planned, however if it enables you to keep the house and keep the food on the table then I would suggest it should be a serious consideration as a short term move.
The key point I think is that there is help available, that you are not alone in this and absolutely no one wants you to lose your house or your credit rating over something that is absolutely not your fault. So call or email your lender sooner rather than later and see what they can do for you.
If you are still looking to move home, buy another property or restructure/remortgage, then now actually happens to be the best time to do it oddly enough. Here are some key things to remember:
- We do not need to meet you to organise a new mortgage or a remortgage for you. Everything can be done on the phone and by email and the whole process can take as little as 30 minutes to complete. In fact in just the first 10 minutes on the phone with one of our advisers you can find out exactly how much you can borrow, what the costs are and then receive an immediate Decision in Principle. Just a short phone call and no meeting and the job is done.
- All identity checking, credit checking, and income checking can be done by us electronically and over email. It is very quick and very simple to do.
- Mortgage rates are at an all-time low. In fact, they are at their lowest since the formation of the Bank of England. We have no idea how long they will stay this low, so now may be the best time for you to either re-mortgage to a better rate or to look at that home purchase. A short phone call with us, and we can tell you what is possible.
Have you put that protection policy in place that you have talked about so many times? Life Insurance, Critical Illness, Income Protection – all things that are there to protect you and your family should the worse happen.
At the moment the insurance companies do not seem to have put up their premiums, but for how long this will last, we have no idea. We have already seen some major insurers remove certain aspects of cover (unemployment cover for instance has been removed as a cover by some insurers already).
At a time when we look inwardly at our own family we automatically go into protection mode – “Am I doing all I can for my family, am I protecting them, is there anything else I can do?” These are things we all ask ourselves daily. Well one thing you can do is have a look at your insurance and see if you have everything in place. This is not a push to get you to buy life insurance. This is simply a reminder of something that we all already know but perhaps have put off for another day. With premiums still mostly unchanged and cover largely still available you may just want to check with us what is affordable and what you can put in place. A short call to one of our advisers and we can check the whole market for you – it is certainly worth checking it out now.