The Coronavirus has affected just about every industry on the planet and the mortgage market is no different. Initially the biggest issue was how lenders were going to value properties and whilst this is still a problem, lenders have improved their ability to carry out computer based valuations and it is now higher loan to value mortgages and unusual properties that provide the biggest issue.
More recently and going forward the main issue in the mortgage market will be around income. Anyone that needs a mortgage whilst Furloughed will only be able to use their Furloughed income towards mortgage affordability, and if your employer is not topping up the Government payment, your borrowing capacity will be reduced. Anyone that was earning bonus or overtime and is no longer will also have their affordability reduced.
For the Self-Employed lenders have traditionally asked for the last 2 years accounts or tax documentation to prove earnings. These of course show the historic picture but not necessarily the current, as a recent payslip would. In the current climate lenders want to know that the business or individuals earnings have not been affected and many are therefore asking for 3 months business/personal bank statements to show cashflow that matches historic income.
Looking forward to when the Lockdown is eased, the earning of bonus, commission or overtime still represents an issue for lenders to form policies around. Historically most lenders in the mortgage market have used three months payslips to prove this additional income and if an individual has not been earning this due the crisis, they may need to work 3 months of overtime before the lender would consider this additional income. Lenders have yet to publish any future policy but we hope they apply a common sense policy – If someone can prove 3 months additional income prior to the crisis and one month post crisis, we hope that this will show enough of a return to normality. Watch this space!
In 20 years working in the mortgage market, including through the financial crisis, I have never seen so many changes in such a short space of time. Different lenders have taken different approaches to different situations and if you are considering a mortgage, whilst I would always recommend advice from an independent mortgage adviser, there has never been a more important time to receive the right advice!
If you would like to discuss how you can get a mortgage offer in lockdown please do get in touch, we are all working from home and can provide support and advice remotely via video calls, email and telephone.
Chris Croake, Director
Photo by Markus Spiske on Unsplash