Coronavirus – what it means for your mortgage
As the economy braces itself for a long, sharp economic shock, what does the coronavirus and measures to contain it mean for your mortgage? And is now the time to remortgage? Or get a mortgage holiday?
March 25, 2020
What does the coronavirus mean for my current mortgage?
The Bank of England lowered the base rate by 0.50% to 0.25% on March 11th, and then made a further reduction to 0.10% on the 19th March.
This should result in tracker deals and many of those on standard variable rates and discount rates seeing a slight reduction in their monthly bills. Lloyds, Halifax, Virgin and Santander have already said that they will pass on the cut on standard variable rates. So check your payments and watch for correspondence from your lender.
Unsurprisingly fixed-rate borrowers won’t see any change given their fixed rate deals.
But more surprising is the news that we’re unlikely to see a new push of even cheaper fixed rate mortgage products on the market.
Despite having access themselves to cheaper money thanks to the base rate cut, lenders may not pass all of the benefit onto borrowers – and may be too worried about the prospects for their business, the housing market and possible increase of defaults during the coronavirus outbreak.
David Hollingworth from L&C said ‘Lender margins have been under severe pressure and I expect that many will want to take the chance to cling onto some of that margin and also will now be dealing with capacity issues as a result of the coronavirus impact. Like all businesses, lenders will be having to deal with the impact on their people, operations and customers of the coronavirus outbreak.”
Should I contact my lender to check my rate?
Things are changing fast and announcements being made daily. As lenders struggle to keep up you may be better off directing questions about your mortgage to fee-free experts at London and Country in the first instance. Or check their SVR Watch showing real-time changes that lenders are making to their rates and passing onto customers.
Reasons to remortgage during the coronavirus
As the dust starts to settle following the base rate cut, now could be a good time to remortgage.
Here are some common reasons to remortgage – even with the cloud of uncertainty hanging over us:
- If your existing mortgage deal is due to end in the next few months, then you should get expert advice on the range of mortgages available to you ASAP. This is very important as otherwise you’ll be put onto your lender’s standard variable rate (SVR) which you want to avoid at all costs as the interest rate you’ll pay is almost always much higher. If you speak to a broker like L&C, they can give you the broader context by reviewing what your lender will offer you alongside what else is available on the market.
- If your mortgage deal is due to end in the next year and you are keen to secure a mortgage for the longer term sooner rather than later. You’ll need to speak to an expert mortgage broker to cost out any early redemption charges and weigh up whether that is a sensible financial decision for you.
- To reduce your monthly repayments. You might be looking for a cheaper deal to make your mortgage more affordable every month. You don’t have to borrow more to switch to a better deal with better rates. There may be fees involved in exiting your current deal, but it could still be financially worth it.
- To fix your payments. You might remortgage to a fixed rate deal to give you certainty of your monthly mortgage outgoings.
- Interest rates are at the lowest rates ever. Fixed rates are already available at extremely low rates and could offer the chance to lock in whilst interest rates are so low. At the moment you can get a 5 year fixed rate deals below 1.5%, 2 year fixed below 1.25% and 10 year deals for 2.25%
Consider a 3 month mortgage holiday
Homeowners and landlords can now apply for a three-month mortgage payment holiday by contacting their lender. The government’s new policy aims to ease the stresses facing mortgage holders during the coronavirus outbreak. Since the change was announced, there’s been some confusion about exactly who can apply and how, so take a look at our mortgage holiday guide for help.