In the Process: Homeowners Edition

Words Louise Gyambibi

As a result of the current COVID-19 pandemic, we saw the Bank of England cut interest rates to the lowest it has ever been at 0.1% in an attempt to ​hold down the cost of borrowing and promote spending to sustain the economy. It is advantageous to acquire more knowledge about the property market, Louise Gyambibi will clarify and provide guidance of what that means for those of us who have spent weeks and months in the laborious mortgage process.

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What does it mean for me as I am already in the process of obtaining a mortgage?

It depends on what stage you are in for the home buying process but across the board, you can expect some delays. If your mortgage application has been submitted but you have not yet received an official offer from the bank, due to the lockdown restrictions you may find that the lender is unable to send out a surveyor to value the property. Until a survey has been completed, the lender will be unable to commit to lending you the money for the house, causing some delay to the production of your offer.

Banks do anticipate that these restraints could cause a backlog once the lockdown is relaxed, so they are proactively seeking alternative measures to value properties. We are seeing an increase in banks carrying out Automatic Valuation Model’s (AVM) that are desktop valuations which ​is an automated computer valuation using property data, recent comparable sales and property listings. As the name suggests, the valuation can be done from a desk; without needing a valuer to physically visit the property.

Ordinarily, lenders are more prone to carry this process out on lower loan to value mortgages, where it is considered lower risk for the bank, as the customer has a larger deposit or percentage of equity in the property. However, a few lenders are relaxing their criteria where possible to accommodate customers with as low as 10% deposit and above.

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In instances where lenders are unable to carry out one of these desktop valuations, the progress of the application may be on hold until after the lockdown. Due to the increase of service demand that lenders are facing for mortgage holidays and the general customer queries, many banks have temporarily removed their higher loan to value products for new business to be able to service their existing customers. This means that with many of the high street lenders, you will only be able to initiate the mortgage process if you have a deposit of 20-40% minimum. Again, this does not apply if your mortgage application has already been submitted.

If you do not have a larger deposit resource available, don’t worry, we do anticipate lending to be stabilised and products reintroduced as society resumes normality.

If you have already got an offer from the bank and you are waiting on your solicitors. You may have read in the news that the government is advising people to delay moving house for now, unless you absolutely have to. If you've just got a mortgage offer, that's still going to be valid for the length of time stated on the offer document - usually three or six months, depending on your lender, this should allow plenty of time. If you've exchanged contracts or are nearing the date of offer expiry, all lenders are now working to find ways to offer a three month extension, so that you can complete your move later.

If your financial circumstances change during this time this could impact your offer, but your mortgage broker can work with you to help better understand your specific situation and what this means with your chosen lender. You can read more about all this here; www.gov.uk/coronavirus.

 Louise Gyambibi - Mortgage Case Manager