If you were thinking of taking a mortgage, then you have to re-think about it. Due to the Coronavirus breakout, all the lenders have stopped giving home loans. Nationwide, one of the biggest money lenders of the UK has refused to sanction andy new loans.
Other money lenders are also pulling out of new loans. This has put the mortgage market in a lockdown. Nationwide said that they will only give loans to the people who have equity of at least 25%.
This does not include the homeowners who have less equity than required and first-time borrowers. Nationwide also said that the new changes will not affect the existing applications. Rather, this decision will help them to focus on the mortgage that already exists. It will also give them time to process new applications.
Nationwide blames the fact that there are a high number of inquiries regarding the ongoing applications and the existing mortgages. This is the reason that they have decided to take this temporary action of allowing loans for houses up to 75% LTV. They are supporting the housing market with this step.
Inspired by Nationwide, other lenders have also taken similar steps. These lenders include Skipton Building Society and Santander. However, there are many lenders who have gone too far. They have reduced the LTV to 60%.
This means that the people who will get a mortgage will need to have an equity of 40%. The lenders who have made this change are The Family Building Society, Virgin Money, Halifax, and Barclays. However, the Coventry Banking Society has reduced the LTV to 65%.
The current status
The finance expert at Moneyfacts.co.uk, Eleanor Williams said that the current withdrawal of mortgage with higher LTV along with home products is just a temporary measure. Within this time, the lenders are assessing the risk and what else they can offer in this current situation.
In this present situation of uncertainty, the providers are more concerned about supporting their customers with all their needs that they may face in the upcoming months.
Chris Sykes of Private Finance said that these changes are made with good intentions. The lenders are now having to work with less staff because of the virus. They are now getting thousands of calls from the people regarding the mortgage payment.
Due to their low number of staff, they are not allowing any new mortgages. This is because they want to do mortgages that have low-risk and high-quality.
Another reason for not allowing any new mortgages is because the valuers cannot go out to see the properties. If there is no valuer, it will affect more complex property purchases. He also said that a lower LTV indicates that it will be an automated or an online valuation.
The government of Boris Johnson is trying their best to reduce the blow of the Coronavirus by paying the employee their wages and by temporarily eliminating the property taxes for businesses. However, for those with weaker balance sheets and the smaller organizations are experiencing a hard year altogether.
What will happen if you have got a mortgage already?
If you already have a mortgage then you have nothing to worry about. The lenders have said that the loans that have already been agreed will not be affected.
Nationwide has said that an application in which there is a reserved product, it will progress normally. Additionally, the lenders are offering extra protection for the people who have been affected by COVID-19.
The customers will be given the option to extend the offer of their mortgage who have already exchanged contracts. This extend will be for three months.
Robin Feith, the chief executive at Building Societies Association said that the borrowers and lenders are facing circumstances that were unprecedented. He also said that the people now have to wait until the restrictions for COVID-19 are lifted for those who were planning to move house at sometimes in the upcoming weeks.
Robin Feith also gave his heartfelt apology to the people who have to start their application for the mortgage all over again. He also said that the extension of the mortgage by three months is very reasonable and fair. The borrowers will now have more time to pay their loans back.
Banks will allow Delay in the Mortgage Payment
Banks like RBS, which is a taxpayer-owned bank, will allow the coronavirus affected people to delay their loan and mortgage payment by three months. Lloyds and TSB will also delay in the mortgage payment. The people can also close their fixed-term savings without having to pay any extra charger.
This will help the people to withdraw money in this adverse situation of Coronavirus. In addition, the banks will also provide the affected business with extra support.