Malcolm on BBC Radio: Getting a Mortgage & Furlough Q/A

Getting a mortgage deal

Recently, we have heard lots from borrowers whose mortgage deals are coming to an end. They are struggling to find what is the best route to take is for them to take, especially during this pandemic. For example, this particularly applies to borrowers looking to remortgage and those on fixed-term mortgage deals.

As an experienced Mortgage Broker in Sheffield, we want to keep on providing you with our support and keep delivering our amazing mortgage advice service. The ‘Moneyman’ – Malcolm Davidson, had a BBC Radio interview on the 15th April 2020 where he answered lots of questions regarding the outbreak of COVID-19 and its impact on the mortgage market. Here are some of the questions that were asked during the show.

Is it possible to shop around and swap your deal at the moment?

“Yes, it is but banks are struggling with certain elements of their operations as well. So if you have a good low loan-to-value, you are right, the rates on offer are some of the best we have seen in years. You can be fixing your interest rate for 5 years at less than 2%, so if you can get a mortgage and your deal is due for a renewal, now is a great time to think about doing it.

The news isn’t quite so good if you are at the higher end loan-to-value if you have only got 5 or 10% equity. One of the main reasons for that is that for those customers that haven’t got much equity in their property or are looking to buy a house with a small deposit, the lenders will have to send out a valuer to check the value of the property. This isn’t a problem at the lower end of a loan-to-value scale because lenders tend to do automated valuations, they can tell how much your house is worth by using a program on their computer there and then.

Also, surveyors and valuers are also on lockdown so they can’t come out and value the home. Also, as borrowers, you wouldn’t want them coming into your house. So, it very difficult for them to function at that end of the borrowing spectrum. Initially, a lot of lenders decided to reduce their maximum loan-to-values down to 60%, however, you will most likely find that they’re around 75% as a maximum. You still will find that the odd lender is functioning above 75% though.”

Will it be become harder to get a mortgage?

“No, I actually think that it is going to get easier. The first few days after the payment holidays where introduced and after they started receiving lots of calls, they set up online facilities to allow you to request payment holidays which has reduced the number of calls coming in. So, they knew that the demand for mortgage deals would be quite high.

Social distancing must be really hard in call centres, so I think that they are going to have to phase staff back into head offices. I think things will return to normal later on in the year quite quickly, the banks had big lending targets, they were all coming to see me at the beginning of the year with their big plans. I’m pretty sure that the Government will want to get the property market back up and running as fast as they can as it is such a big cash cow and it generates a lot of corporation tax from the finance industry. So I think that they will want to do everything that they can to get people back to buying houses and taking out mortgages again as quickly as possible once the coronavirus situation has come to an end.”

What about furlough?

“We have had a lot of enquires about furlough and its effect on your mortgage payments. A lot more companies have taken this up than the government originally expected, this means that the cost is going to be massive, it will be about £10 billion a month. Sadly, a lot of the workers that are on furlough leave realistically might not come back to their jobs.

Lenders are reacting to this in a good way and really supporting their borrowers. Some lenders are continuing to lend to furloughed workers or they are not taking into account things like bonus, commission and overtime payments, they are only basing their lending on the 80% of the salary.”

Should you be snapping up a mortgage now or should you be more cautious?

“If you feel that there is a risk that you may not return to work, then you shouldn’t proceed to buy a property, it’s a long term investment and such a big commitment to make. You could look at it differently if your deal is coming to a renewal. If for some reason you cannot swap lenders because your deal is finishing and you are on furlough or your loan-to-value is too high, often you will find that it is possible to take a product transfer or a product switch within your current lender. Those products will be made available to you either directly or through a Mortgage Broker in Sheffield, like us.

You can apply for these products without any proof of income because the lender is putting you in a better position by offering you a lower rate than what you would be on if you would roll straight onto their standard variable rate of interest. All of these products remain completely available and lenders are quite active in that market as well to support borrowers.

A lot of the specialist lenders who operate with customers that have had poor credit history have stopped lending. Other than that no one is really pulling mortgage offers. In fact, mortgage offers normally stand for 6 months, however, some lenders are extending their mortgage offers to 9 months in some cases, so if you are halfway through a purchase, a further 3 months could really help you out.”

Can you try and renegotiate your mortgage offer?

“Not yet, however, I wouldn’t be surprised if we see that later down the line. We have no record of reductions in purchase prices. Everything on pause so there would really be no point in trying to negotiate at the moment. The big financial institutions and the law firms aren’t really geared up to be working from home, so everything has been brought to a halt. We could see people trying to negotiate down the line it’s hard to say at this point.

If people are worried that their asset might reduce, it would be understandable for them to be thinking twice about their purchase. This could result in them pulling out of the purchases. Our industry is just like everyone else’s, the sooner everything is behind us the better.”

I am not on furlough, should I pay off some of my mortgage?

“Yes and also no. It’s always a good idea to get ahead of your payments if you have got some spare money. The more that you pay, the less interest you will pay overall.

On the other side of the coin, it’s never been as cheap to borrow, so your mortgage is only 1 or 2%, so it is a great time to save and also a great time borrow.” & Sheffieldmoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited registered in England, registered number 6789312 and registered office 10 Consort Court, Hull, HU9 1PU.

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