What are the mortgage options, from self-employed to those on vacation?
The world of mortgages is increasingly divided into winners and losers, with borrowers perceived as low-risk groups being offered some of the lowest interest rates ever, and stricter rules apply to the self-employed and those on vacation. Figures released this week showed that the number of new mortgage deals on the market is the highest since the first coronavirus lockdown began in March 2020.
Data provider Moneyfacts, which released the numbers, says the significant increase in transactions with a loan-to-value (LTV) ratio of 90% this month up from 70 last July may indicate how banks and other lenders are feeling. yourself more confident. However, the rates and conditions offered for different categories of borrowers can vary greatly.
There are nearly 5 million self-employed people in the UK and this group faces some of the biggest challenges when it comes to getting a mortgage. Over the past few weeks, a number of lenders have introduced stricter lending rules for those who run their own businesses.
For example, Santander limits its mortgage loans to 60% LTV for new self-employed applicants, thus requiring them to post 40% collateral, which for many will be beyond their means. This new restriction took effect on January 9 and has been described as temporary, although it will likely continue for at least a few more weeks.
If an applicant received financial support from the government or his business was shut down during quarantine, lenders seem to be particularly tough on his applications, according to Will Rynd of Habito mortgage company. jump with creditors than ever before.
Self-employed people are strongly advised to speak with an independent mortgage broker who will have an idea of what different lenders are asking for.
Gather all your documentation ahead of time, including bank statements from the past six months, both personal and business, Harris said. Make sure your credit score is correct. If you have debts, consider cutting them down if possible, as the lender will take them into account when deciding how much you can borrow.
Those on vacation
The Treasury layoff program has boosted wages by nearly 10 million jobs since its launch last March, and millions of people are still receiving aid. The government will continue to pay 80% of wages until the end of April, after which the scheme should be discontinued, although it may well be extended.
Some lenders such as Coventry, Nottingham Building Society, Platform and Virgin will not accept termination income when assessing affordability, he says. Others require the applicant to either return to work or have a fixed return date. Furloughed job seekers will need to provide a letter from their employer confirming their base salary, return date and any other return conditions.
Lenders can apply different rules depending on how much you want to borrow, for example, Metro Bank says that for mortgages over 80% of LTV, those currently laid off or recently released will not be accepted.
Those who hope to re-lay
For some of those who already have a home loan, there are threats and opportunities ahead. The current isolation raises questions for the future, and some people are starting to worry about how they can afford their existing mortgages, says Sarah Coles of investment firm Hargreaves Lansdown. However, if you have the option to switch, you can save quite a bit of money by going for a more competitive deal, especially if you use your lender’s standard variable rate (often costly).
Moneyfacts reported this week that the average new five-year fixed rate for those with a 40% deposit has dropped to 1.91%. The cheapest such deals available this week started with about 1.3% from lenders such as Barclays, NatWest and Platform (part of the Cooperative Bank).