Getting a mortgage in the pandemic
When the lockdown came into effect on March 23rd 2020, everything went on pause. People were days away from completing their purchase and the lender put a stop on releasing funds. Some were told that once lockdown was eased the funds would be made available to them again, and the mortgage offer would be extended until that time. This was mostly the case with large high street lenders - Santander, Halifax etc. Some were told that their case would need to go through some light underwriting to enable the lender to extend the offer, establishing if the applicant’s circumstances would be adversely affected by the lockdown, and if they would be left in the same financial position once lockdown was lifted. For some unlucky individuals who had self employed businesses that would struggle to re-open after lockdown, or be able to re-open with a vastly reduced cash flow, the offer of a mortgage was withdrawn at that point.
Some lenders suspended lending completely, with a notice they should or might resume lending after the lockdown was eased. Some considered lending during the lockdown for possible completion (once it was allowed) if it was a purchase. The lending was significantly tougher where larger deposits were needed, or with poorer loan to values for remortgages. If a survey was needed to establish value, then the case would be prepared ready for when government guidelines would allow for a surveyor to visit the property. Some lenders were offering desktop valuations if the mortgage deal warranted it.
Once lockdown was lifted, the landscape was still very much different to pre-lockdown lending conditions. The most affected were the lenders that operated in the niche or adverse sector of mortgage lending; this was due to difficulty in securing funds from the London money markets, and fear that a large percentage of the potential applicants who were already classed as sub-prime would have even less ability to service a new mortgage. It has been the case that these lenders are gradually coming back into the market, but they have less products, higher interest rates and reduced access through brokers (Together Mortgages for example have gone back to only allowing applicants to apply through a limited number of packagers).
Prime lenders, who were offering 95% and 90% mortgages, are now only offering 90% mortgages or less. The 90% mortgages are offered on a first come. first served basis by releasing tranches of money during the morning of a given day. Most lending is limited to 85% or less, and with tighter underwriting. They are also declining cases where the applicant has opted for a payment holiday on their mortgage, or credit cards over the lockdown period.
People on furlough were judged on a case-by-cases basis. If it was deemed to be the case that their job looked set to return to normal after lockdown, restrictions were removed and they would accept them based on either the amount received from furlough, or what their income will return to once normal work resumed. Sometimes this would involve a letter from the employer to confirm this they would return to work on a set date. Some lenders would not look at applicants on furlough until they returned back to work.
To be continued borrowing on commercial property in the Pandemic
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