Pandemic Impact Harming Ability to Borrow for Remortgages and Mortgages

Pandemic Impact Harming Ability to Borrow for Remortgages and Mortgages

The pandemic has made it difficult for many homeowners to remortgage and hopeful home buyers to purchase their desired property. Financial instability due to employment changes or self-owned business issues brought about by the pandemic or lockdowns has made borrowers more of a risk to lenders. According to a recent study, one-fifth of UK homeowners were unable to remortgage since the pandemic began.

The study, conducted by Comparethemarket, noted that 19% of homeowners were unable to remortgage, 41% of those had their applications rejected due to job loss and 32% due to being furloughed. Homeowners reporting they believed their application was rejected due to salary cuts amounted to 26% of those unable to remortgage.

Homeowners that have had their mortgage deal end and are unable to remortgage will be put on their lender’s standard variable rate (SVR). Experts have noted that those paying on a SVR versus a lower interest rate remortgage could be paying much more than needed. It is estimated they could see their payments increase by hundreds of pounds per month versus realizing the savings that a remortgage could have offered.

Home buyers encountered the same type of situations where they were rejected for a mortgage due to financial insecurity brought about by the pandemic. One in five first time buyers had their home purchase fall through. 

Of those that did not purchase, 23% reported the provider reduced their initial loan to income offer. Another 18% reported the mortgage provider increased their initial interest rate and 18% said the lender asked for a larger deposit than was first required.

Lenders have been easing up on the tight criteria seen weeks ago for borrowing. Loan to value levels have been raised by lenders on some products, and the government has issued a new program for lenders to offer lower deposit requirements. 

Those that have had difficulty in borrowing could consider the assistance of a remortgage broker or mortgage broker. They work with many lenders and are aware of which would be willing to work with borrowers that have complicated situations due to the pandemic. Also, they often have exclusive deals from lenders that are not offered to the general public. Due to their working with many lenders, their expertise, and their possible exclusive deals, it could be helpful for any borrower to seek a broker when shopping for a remortgage or mortgage, whether they have special needs due to the pandemic or not.

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