How Covid -19 has affected your mortgage application 2020 has been an interesting [ to put it mildly] year, and the global pandemic and the economic effects it has had have definitely been experienced within the mortgage market here in the UK.
The UK government has tried to negate some of the immediate effects of the Covid-19 pandemic by issuing government financial interventions in the form of a furlough scheme to help employers retain their employees, and prevent mass redundancies, as well a stimulus within the housing market such as stamp duty exemption periods until the end of March 2021. All of these have played a part in forming the current mortgage market we see going in to 2021.
During 2020 we have seen the reluctance of lenders to lend where there are not large deposits available. 95%, and 90% mortgages all but disappeared from the marketplace. However, as we head in to 2021, we are starting to see the return of at least 90% deals from major high street players such as Halifax, and Nationwide Building society. This it seems, is because there is now some confidence that the market will hold up to these loan to values and also the lenders have their processing under control somewhat, and therefore can manage these application volumes effectively.
What have been the main changes to application requirements?
Most lenders now have some form of covid-19 mortgage criteria within their policy. This centres around how you have been affected by the pandemic as an individual, on a financial basis.
Mortgage applications will now ask questions such as:
How have you been adversely affected by the Covid-19 pandemic?
Have you been or are you currently furloughed from your current role?
Have you been put on notice of redundancy? As a side note the lenders will also check whether your company has put out notices of mass redundancies to the media [large employers]
Specifically for self employed, or business owners [Ltd company directors] they will be asked to demonstrate the following:
What affect has the Covid-19 pandemic had on your business?
Have you applied for a bounce back loan [BBL], or corona virus business interruption loan [CBIL]
How has your turnover been affected, and what projection on future profitability has this had?
What government assistance if any have your received? Such as furlough grants, and government grants for business rates etc.
How have application processing times been affected?
As the year has progressed, we have seen that application to offer time scales have been affected greatly. As lenders have had to move their staff to remote working set ups, as well as a large increase in application volumes, lenders have experienced significant service delays.
Add to this the fact that surveyors have been playing catch up all year, along with the inability to conduct some surveys due to localised, or national lockdowns, it is not uncommon for applications to be taking weeks longer than they were at the beginning of the year.
It would be unfair to tar all lenders with the same brush however, as some have really got their act together and are processing applications much quicker than others. The key to speed is having a mortgage application correctly packaged to begin with, so that you are not constantly being asked for further information and documents, which each time go into an underwriting queue which could take days, or more commons weeks for the documents to reach the front of the queue.
Solicitor and conveyancing timescales
It is fair to say that the stamp duty holiday activated the marketplace exactly how the government intended it to. The housing market has been very busy, particularly in the upsizing market, where vendors are selling, and then buying a larger property in the £250,000-500,000 price range, where there are currently significant savings to be had. Of course, whilst the savings are not as great for buy to let purchasers, they do still exist, and as such many investors have also been activated to buy property.
The volumes of transactions going through currently is putting pressure on solicitors and conveyancers who are also being forced to work remotely, and therefore not as efficiently as could be the case. This pressure is only going to build as we hurtle towards the deadline of the end of March 2021 and there is the risk the longer buyers wait to start a purchase the less likely they will make this deadline.
Some local councils have also experienced delays in returning searches, which it appears, even in 2020 are still manually generated. An outdated, and archaic process which needs bringing online, with immediate download available at the earliest opportunity. [Don’t it expect that to happen anytime soon however.]
All of this adds up to longer conveyancing times than we have previously experienced.
Overall, whilst the pandemic has been catastrophic for the economy in general, the stimulus introduced by the government have definitely activated the housing market. Mortgages are still available, and we are not experiencing a credit crunch in any form. Applications may take longer, but our advice to ensure your application has been advised on and is packaged correctly to help speed up your application to formal offer time. However, be patient and work with your broker to get the result you want.
About the author:
Michael Webb is MD of Mortgage Republic, a whole of market mortgage broker based in Suffolk, and helping clients all over the UK purchase property, invest in buy to lets, and drive down the costs of their mortgage by securing better deals via appropriate remortgage advice.
Michael has also authored 2 books available on Amazon:
A first time buyers guide to mortgages:
The property investors finance manifesto: