It’s mayhem in the mortgage market at the moment due to a paperwork backlog at banks and pent-up demand from the lockdown.
Lenders are making changes to their home loan deals with little or no notice to limit the amount of business they take on.
So that cheap rate you were eyeing up could quite easily be gone tomorrow. Or the terms and conditions may change suddenly, meaning you no longer qualify for a loan you thought had been secured.
Here are four other places to turn if you are caught up in the chaos…
Lee Hockins, from Summit Wealth financial advisers, says “It’s virtually impossible at the moment to get a mortgage at 95% loan-to-value and there are only a small number of lenders offering 90% mortgages – and none of the big ones.”
Lloyds, NatWest, Barclays, Santander, TSB and most recently HSBC have all pulled out of the market for mortgages with a deposit of 10% or less, hammering first-time buyers.
The good news is that smaller regional building societies may be able to help. Many still assess applications manually, unlike big banks which often use automated underwriting technology which can result in a computer-generated rejection.
Having your application assessed by an individual means your specific circumstances can be taken into account. Try the Buckinghamshire, the Penrith and Stafford Railway.
Bank of Mum & Dad
Popular mortgage deals that allow parents to help their off spring on to the ladder are being cut back too.
But the Bank of Mum and Dad isn’t entirely closed.
After Lloyds shut its Lend a Hand mortgage to new applicants, the main mortgage designed for parental help is Barclays’ Family Springboard deal. This allows a family member or friend to put at least 10% of the purchase price in a savings account with the bank in place of a deposit.
Ray Boulger, of mortgage brokerage John Charcol, says “The Barclays Springboard mortgage is the best of the deals for people who are getting help. It’s really good value for first-time buyers with either a small or no deposit, who has someone who wants to help but also wants to keep control of their funds.”
Tipton & Coseley Building Society has launched a Family Assist mortgage offering up to 100% loan-to-value mortgages for buyers, so long as a relative has a 20% charge on their own property or puts 20% of the amount borrowed into a savings account.
But some are limiting the amount of outside help allowed. Nationwide recently changed the criteria for gifted deposits, so borrowers who want a 90% loan-to-value mortgage can only be given 25% of the deposit, meaning they have to provide the rest themselves.
A Broker on Your Side
With banks launching and ditching mortgage deals on an almost daily basis, a broker can really prove their worth.
Not only do they often get tipped off in advance when a deal is about to be pulled, they are clued up on the specific criteria that each lender will look for in your mortgage application – and can stop you wasting time. Brokers will also have a good idea how stretched a bank’s mortgage department will be, helping you avoid disappointment when demand is high.
Try a Lifetime Mortgage
For the over-55s who are retired or approaching retirement, an alternative option is a so-called retirement interest-only mortgage.
Boulger says “With these deals, the eventual sale of the property can be used as the repayment strategy. So lenders assess whether you can afford the loan on the cost of paying the interest only in retirement, as opposed to a repayment deal where you have to pay back some of the capital each month. The downside is that if it’s a joint application, lenders have to decide whether, after one partner dies, the surviving partner would be able to support the mortgage from the remaining income.”
Lenders offering this type of mortgage include Nationwide, Leeds, Bath, Ipswich, Loughborough and Tipton building societies.
Or… let the chaos play out
Mortgage rates are expected to remain at current levels for some time – but house prices may not. Many experts believe that while prices are heading up at the moment, there could be a fall back when the stamp duty holiday ends in March next year.
Remember, if you are buying and selling at the same time, then a fall in the market is likely to impact both ends of the deal. So you may be no worse off if you wait – and find it easier to borrow the amount you need for your next mortgage.
[Source: dailymail.co.uk, 21 September 2020]
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