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What Does the Current Mortgage Situation Look Like?

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Want to buy a house but are unsure where you stand?

For potential home buyers, due to COVID-19, the world of mortgages can look uncertain. 

There’s confusion about the market, property purchases and whether things are moving. Banks have been withdrawing deals and options have been severely limited. First-time buyers and buyers with smaller deposits have been some of the worst affected.

But – things are on the move again.

To help clear up any questions, we’ve put together a handy guide with all the latest updates from our mortgage providers at GoTo Mortgages. 

A Snapshot of the Current Climate

It’s easy to see why many of us are unsure what to do next when it comes to the housing market.

We’re officially in a recession for the first time in 11 years. While the furlough scheme helped many, plenty of others have found themselves made redundant. Unemployment is set to hit 7.5% by the end of 2020. GDP in June was a sixth below its level in February.

However, the economy rose 8.7% in June compared to 1.8% in May.

So, where does that leave hopeful homeowners?

Stamp duty holiday

With housing demand rising, there’s been pressure to get the market moving again.

As you’ll probably have heard by now, the government has announced a stamp duty holiday. This goes for all property sales in England and Wales. 

But, what does it actually mean?

Between 8th July and 31st March 2021, home buyers won’t pay stamp duty up to £500,000. This could save you up to £15,000.

Stamp duty is payable upon completion, therefore you will benefit if you’ve exchanged contracts but haven’t yet completed.

This is in place to help get the housing market moving again. Since being released, the ‘holiday’ has generated a lot of activity and has motivated home movers across the country. 

How Much Can You Borrow?

The impact of COVID-19 hit the property market hard. For many months, many lenders have presented extremely limited choices to hopeful buyers. Loan-to-value is just one example of this.

However, things are changing, albeit at a slightly slower pace and with adjusted lending criteria.

While there are currently no lenders offering 95%, there are several lenders now at 90% LTV, including Metro, Nationwide, Post Office and HSBC. Bear in mind that due to some system issues some lenders are currently experiencing slower than normal time to process mortgage applications. It can take several weeks to submit a case – however this likely won’t be permanent. 

What If You’re On Furlough?

Lenders’ approach applications from furloughed workers differently.

From the beginning of September onwards, there are several lenders that are now unable to accept furlough income on an application. The lenders we are aware of at the time of updating this post are TSB, Accord, Skipton, Clydesdale, and Virgin Money.

One piece of advice is to try and save a larger deposit if you can.

Recent Changes to Mortgages

There’s been some good news recently for hopeful homeowners. 

Green Deals

Going green could help you save. 

If it’s a cheap deal you’re looking to secure, a ‘green’ mortgage could be your answer. These deals offer lower rates to people in energy-efficient homes

This is largely because these types of homes are generally considered lower-risk, as lower energy costs leave more money for mortgage repayments. 

Bounce Back Initiative 

Beverley Building Society announced its local ‘bounce back’ mortgage initiative, designed to help the self-employed in Yorkshire and The Humber. 

Borrowers can be considered for a 75% LTV, with just one year of accounts. There’s also a range of discounted two and three-year deals. 

More Fixed-Rate Options

In the outbreak of coronavirus, mortgage deals on the market halved. However, we’re seeing more options begin to pop up. This includes Barclays’ 10-year fixed-rate mortgage, which is ideal for those looking for a low-cost option and those looking for long-term security, or who aren’t planning to move in the next 10 years.

Of course, this isn’t for everyone. There are potential issues, including a lack of flexibility and ERCs (early repayment charges).

However, it’s just one example of the market’s response.

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Shared-Ownership Mortgages

First-time buyers with lower deposits (less than 10%) have been the worst-hit.

However, shared ownership could be the answer you’re looking for. 

Shared ownership mortgages are still available. These have a number of benefits, including bringing down the size of the deposit a buyer needs (5%) and allowing more people to get on the property ladder. 

Further Help for First-Time Buyers

Some good news for buyers (particularly first-time) is that the government has extended the Help to Buy equity loans scheme until the end of March 2021. This should help ensure more property sales can go through.

This scheme has been a lifeline for many, one example of the government’s help for buying homes. However, COVID-19 threw things into uncertainty, as many homes were unlikely to be completed by the scheme’s building deadline of December 31st. 

This deadline has since been extended to 28th February 2021, an extra two months for builders to finish properties. The final date for purchases to be completed is now the 31st March 2021.

This will hopefully throw a lifeline to hopeful homeowners. 

Help to Buy Reform

From April 2021, the Help to Buy scheme will be limited to first-time buyers alone, rather than all buyers. Regional price caps will also be introduced; up to £600,000 in London.

COVID-19 hasn’t delayed these plans. As of yet, the government isn’t going to be scrapping these changes. 

Find the Right Deal for You

So, while things are not where they were, there have been some positive changes. The housing market is currently very busy. 

Why not explore your options?

We can connect you with the right people to make your dreams of buying a reality. 

Get a mortgage quote for free below.

Find a Mortgage

Accurate at time of publication.

Last Updated: July 30th, 2021

Phil Spencer

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