Expert mortgage advice: part 1
Here at Mishon Mackay, we pride ourselves on offering expert advice, which is why we work with Rob Starr, CEO of Seico Insurance & Mortgages Ltd. for all our mortgage expertise. This blog marks the first of a series of posts where Rob will offer his insight on why it’s more important than ever to use a mortgage broker now, rather than go direct.
Despite some media suggesting otherwise, the mortgage industry is not closed down. However, it is changing on a daily – if not on an hourly – basis, therefore you either need to have constant updates at your fingertips or know someone who has.
In all likelihood, the only people who are alerted to changes as they happen are mortgage brokers. Only mortgage brokers are able to keep an eye on the whole market and can see instantly when lenders, and often multiple lenders, put through emergency changes.
This article will cover what you need to know about (click each bullet to jump to the section):
What’s actually changing?
Loan to Value (LTV)
The LTV is certainly a constantly changing feature. Before the COVID-19 lockdown, the market was awash with 95% LTVs, meaning for every £100,000 value, you could borrow up to £95,000.
Since the lockdown, we have seen the LTV slide backwards and forwards, from zero lending with some banks to a 50% maximum, back up to 95% with HSBC and then, within a few hours, back down to 75%.
One would hope and expect that lenders will become more comfortable with the market and get back to long-term planning, rather than reactive moves, but we are likely weeks away from that.
Yes, that is correct – an increase rather than the decrease we all hoped for. The reason, I think, is probably obvious when one thinks about it; first of all, lenders need to stop the outflow of money to the extreme they are currently facing. They also need to protect themselves in the short-to-medium term against a recession that may or may not come post this lockdown.
A lot of people with existing mortgages are going to be seeing their existing deals expire at some point and will want to take a new fixed rate to protect themselves. With so many rate changes going on, you would need to be hooked into every lender to know the best deal currently available for you. This is once again the job of a broker, as they can see the entire market and every deal as it comes and goes. At Seico, we have seen new rates enter the market and be withdrawn from the market all within the space of half an hour.
Top tip: Look at your rate expiry now, rather than wait until it is upon you, as your broker can secure you a rate switch now but wait until the due day to put it into force.
This means that by the time your actual deal expires, you already have the best rate secured. If the rate secured happens to be higher than the one available on the day of your switch, then you simply do not take the secured one and instead take the cheaper one on the day – but your broker will do this for you. This way you are making sure that you do not get caught out by a sudden upward shift in the rates at the last minute. This is a relatively simple job for your broker to do.
Understandably, credit scores during this time are also a worry for people. Whilst people want to take advantage of a payment holiday to take them through this difficult period, they are worried that their credit rating will be negatively affected.
Fortunately, all credit rating agencies have said that they will not penalise anyone for taking a payment holiday due to the pandemic, as long as it is in agreement with the lender. So, the key here is to ask before you take. Ask your lender and, if they agree, then you are absolutely fine. If the lender does not agree to allow a payment holiday, then you may find your credit rating is affected if you go ahead and take it anyway.