As millions of workers are furloughed or work from home, it’s easy to assume that whole sectors of the economy are currently closed. However, despite what you may have read, mortgage lenders are very much open for business, and recent Base rate cuts have seen remortgage rates fall.
If you’re considering switching your mortgage, or your current fixed or tracker rate is coming to an end, now could be the ideal time to act. Here’s why.
Remortgage rates fall as the cost of borrowing reduces
It’s perhaps no surprise that some lenders have stepped back from the market during this time. Considering the economic uncertainty and issues surrounding transitioning to remote working, Moneyfacts reported in mid-April that the choice of mortgage products in the UK had fallen by 46% during the coronavirus crisis.
However, more than 2,400 remortgage deals are still available in the UK, and the cost of many of these has fallen in recent weeks.
Moneyfacts report that, following the Bank of England’s decision to reduce the Base rate twice in under a month, the average two-year fixed-rate mortgage deal fell from 2.43% to 2.19% between 11th March and 14th April 2020.
The average five-year fixed rate fell from 2.73% to just 2.48% in the same period.
Tracker rates are also likely to be popular in the weeks ahead with many experts suggesting that interest rates are set to stay at these emergency levels for years to come.
The Telegraph reports that, according to LIBOR futures markets, traders expect interest rates to stay at their present level until 2023, with only one further rise priced in by 2025.
Start the remortgage process now
If you’re considering a remortgage, it may be wise to start the application process a little earlier than normal.
There may be some inevitable delays in processing due to changed working arrangements at both lenders and solicitors, although conveyancing firm LMS has reported that remortgage completions were 22% higher at the end of April than they were in the week commencing 23rd March.
LMS chief executive Nick Chadbourne says: “Increased instruction levels are a positive sign for the market, with borrower enquiries nearing pre-lockdown numbers.
“Reduced ID requirements, less paperwork for customers, and lower need for searches all combine to overcome current challenges to remortgaging and could reduce the likelihood that transactions are cancelled.”
Automated valuations mean ‘social distancing’ not an issue for surveyors
Since the lockdown began and social distancing guidelines were introduced, it has not been possible for surveyors to undertake physical valuations of homes.
So, to ensure remortgages can continue, many lenders are using Automated Valuation Models (AVMs) to estimate the value of homes. These AVMs use data such as the price of homes in the local area to calculate a valuation of a property.
Some lenders, including Nationwide, NatWest and Santander, will 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.
As a guide, Moneyfacts reports that the UK’s ten biggest lenders all use automated valuations on residential mortgages and eight of these will use this on remortgage applications of up to 60% LTV.
Get in touch
If you’d like to take advantage of the low mortgage rates available, get in touch to find out how we can help you. Email firstname.lastname@example.org or call us on +44 (0) 20 3786 7270.