As with many other industries, the coronavirus pandemic has had a significant impact on the property market. Many house purchases have been put on hold because surveyors are struggling to get out to undertake valuations, while lenders have withdrawn many products as they close offices in line with government guidelines.
However, the pandemic has offered homeowners an opportunity to save money by remortgaging. The remortgage market is open for business, so here are five reasons to think about a remortgage during the coronavirus pandemic.
1. Interest rates are low
Even though hundreds of mortgage deals for house purchase have been withdrawn in recent weeks, there are still lots of remortgage products available.
The Telegraph reports that market analysis by consultancy firm CACI has found that 11% of all mortgage maturities this year will take place in April, with more than £20 billion of loans reaching the end of their initial term.
These borrowers will typically revert to their lender’s Standard Variable Rate (SVR) at the end of their deal, which means that there are significant savings to be made by switching.
The newspaper reports that a homeowner with a £150,000 mortgage outstanding would pay £834 per month on a typical standard variable rate of 4.5%.
By moving to the cheapest rate on the market, a 0.84% tracker from Barclays, they would pay £555 a month – a saving of £3,348 a year. The Barclays deal has a £1,999 fee. A fee-free equivalent is available with a rate of 1.18%.
2. Lenders are accepting digital documents
When applying for a mortgage, most documents such as payslips and bank statements are already acceptable to lenders as scans or PDFs.
In recent weeks, lenders have also streamlined the application process by relaxing proof of ID and address verification rules to allow scanned copies.
For example, it may now be possible with some lenders to use the following:
- A scan or photo of your ID and proof of address documents
- A photo of you holding your ID and proof of address documents facing the camera
- A close-up photo (selfie) of your face for ID verification.
These changes make the process more straightforward and mean you can apply without having to leave your home.
3. Lenders are using automated valuation models
In recent weeks, the number of house purchases has fallen significantly. This is partly because they typically require a surveyor to carry out a physical inspection of a property, and all non-essential work has been banned during the lockdown.
However, it is still possible to continue with a remortgage as many lenders use Automated Valuation Models (AVMs) to estimate the value of homes. This can make the process more efficient as it avoids the need for a surveyor visit to the property.
Some lenders, including Nationwide, NatWest and Santander, will now only lend up to 75% of a property’s value while others may have different loan-to-value limits for AVMs. Speak to us to find out more.
4. Capital raising is possible at excellent rates
Many people remortgage to benefit from a better interest rate, but it’s also possible to use a remortgage to borrow additional capital.
Securing borrowing on your home means you benefit from attractive rates. If you’re at home for a long period you may be inspired to get that new kitchen or extension, or to finally landscape your garden!
5. A remortgage could be a better option than a mortgage payment holiday
We’ve previously outlined everything you need to know about Covid-19 and mortgage payment holidays.
Thinking about a remortgage may actually be a better way to review your finances in the light of current events. A remortgage could be more suitable than taking a mortgage payment holiday – for example, if you wanted to switch to an interest-only mortgage and you have a suitable repayment vehicle in place.
Have a chat to a professional adviser to establish what the best option is for you. Despite the lockdown, we’re continuing to ‘meet’ clients using video conferencing, and secure online questionnaires to collect information about your personal and financial circumstances.
Email [email protected] or call us on +44 (0) 20 3786 7270 to find out more.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. Think carefully before securing other debts against your home.
Buy to Let (pure) and commercial mortgages are not regulated by the FCA.
