• Brian

Mortgages : The New Normal

Is it harder to get a mortgage now?


Everyone has had to experience a lot of changes in their life recently. How has that impacted mortgages and your ability to obtain one.


Affordability

Certain job roles might be scrutinised at a higher level, but this is more likely for self-employed individuals. If you are employed and can show regular income from your last monthly 3 payslips you should be treated as normal. Self-employed income is normally looked at historically by assessing the previous years accounts or Tax calculation, but now in addition, the lender will ask for proof of current income by way of business bank statements


Some lenders have looked to slow the amount of applications by reducing their income multiples. For example, Virgin just announced that any customer with joint income below £50,000 would not be able to borrow more than 4.49x their income and Natwest will only consider 4.25 x self-employed income but up to 4.95 x income for an employed person (with a 25% deposit)


Affordability has improved if you are looking to switch lenders to find a better rate and not borrow any more. Carrying out a “like for like” remortgage will often allow a lender to adhere lower stress tests when assessing what you can borrow. This is great for people on high Standard Variable Rates or with lenders who do not offer retention deals


Valuations

Lenders are trying to use a large number of desktop or automated valuations to avoid the need for a visit to a proposed property. This can work out very well if you need to move ahead quickly and if the lender’s system can approve the valuation instantly. I have not seen a dramatic drop in property valuations via this system so definitely see the benefit. This has allowed valuers to clear their backlog and reduce the time it was taking to arrange a survey.


This will not protect you as the buyer, we strongly advise you to get an independent survey of the property you are purchasing to make sure it is up to date and in a reasonable condition and check there are no issues such as subsidence or damp etc


Deposit size

Size has never been more important for deposits. With the increase in property values, getting a decent deposit is tricky. Demand for smaller 15% deposit mortgages are becoming increasingly expensive with rates starting from 2.8% compared to around 1.5% back in May. 10% deposit are still limiting but last week Accord entered back into the 10% deposit market with a 2 year fix at 3.69%. Nationwide and TSB will be opening up their proposition soon as well. Great that they can offer this, but the high rates might put off a potential buyer until the cost of borrowing at that level starts to drop next year post Stamp Duty holiday - if they do.


Overview

2020 has brought may obstacles and change for everyone. Mortgage lenders have tried to respond and adapt their processes and criteria to protect themselves and this means we are in a constantly changing and challenging environment.


This has not halted mortgage approvals in August through to October but this could simply be the market catching up from low approvals in May & June when the first lockdown hit.


The eligibility lenders require to be accepted will probably continue to twist and turn over the foreseeable future. To stay ahead of this keep speaking to your broker, they will be able to guide you through and help find your solution


Ideal Mortgage Advisers – info@imabristol.co.uk – 01174 446753


Your home may be repossessed if you do not keep up with repayments on your mortgage