Coronavirus support extended to landlords
- Published: Thursday 19 March, 2020
- Updated: Tuesday 05 May, 2020
- By: Nicola Eaton
Trade association for the UK banking and financial services sector, UK Finance, has announced that support for mortgage finance is being extended to buy to let clients.
Many lenders had already made announcements to residential mortgage customers, but this reassuring step to support UK landlords is great news for the sector.
What do I do if I need help?
Speak to your mortgage lender if you need help to discuss the options available to you.
What support will be available?
- Payment holidays of up to 3 months will be available without your having to be assessed for eligibility
- Additional, tailored help will be offered to those willing to have their needs and circumstances assessed
Details of the support available
A payment holiday allows you to defer mortgage payments.
Speak to your lender about payment holidays, don’t just stop paying.
Be clear that this does not mean you do not owe the money. You do, but you can temporarily stop making payments, for up to 3 months, to help you out if you are being impacted by the Coronavirus.
Interest will still apply to the loan amount outstanding.
When the payment holiday ends, your lender will work with you to establish how you will repay the sums you have missed.
Am I eligible for a mortgage payment holiday?
There are two factors which you need to meet to be eligible for a mortgage holiday:
- You must be up to date with your mortgage payments
- Your tenants will have suffered a loss of income as the result of Coronavirus
Be aware that there are other options available. A payment holiday may not be the right one for you, which is why a discussion with your lender is essential.
If you are already behind with mortgage payments, see “I’ve already missed mortgage payments”.
How do I arrange a mortgage payment holiday?
If your tenant has experienced a loss of income as a result of the Coronavirus, you do not need to produce documentation to prove this. You just have to contact your lender and tell them that this is the case.
The benefit of a payment holiday should, of course, be passed on to your tenant in their rent payment(s).
There will be a variety of ways to repay the missed payments, offered by your lender.
When will my payment holiday application be granted?
This will vary according to lender turnaround times, which are being impacted by the impact to all of the Coronavirus. Ask your lender about this, they will have the best understanding of processing times.
What are the implications of taking a mortgage payment holiday?
Mortgage payment holidays are an option with some lenders, in the normal conduct of their lending. However, deferring mortgage payments can impact a borrower’s credit history in usual circumstances, depending on the lender.
Given the unusual circumstances currently in play, lenders are doing everything they can to make sure that your credit score is not affected.
Speak to your lender for clarification on this.
I’ve already missed mortgage payments
The impact of lost income, due to the Coronavirus, on those already behind on mortgage payments, is obviously of even greater significance.
Lenders will do all they can to give their support to customers.
Lenders are offering a “possession moratorium”, what is this?
At the farthest extreme, from 19th March 2020, mortgage lenders have agreed that no homes will be repossessed for a period of three months.
This is what is meant by a “possession moratorium” (moratorium means a temporary stop to a given activity).
The detail around the possession moratorium includes:
- All possession orders will be suspended
- Lenders won’t start any court action (this includes putting a case to court or instructing on matters)
- Formal demands for payment will be made, this is to ensure that a) those who owe money are aware of it and b) those who owe money are made aware that a case will be subject to proceedings at some point
- Exceptions will apply if a property is standing empty or the customer wants a possession to proceed
- Receivers of Rent will be used by buy to let lenders, but if the tenant is unable to pay the rent the case would not move to possession.
- This is one of the measures lenders are taking to support mortgage customers, especially those in particularly difficult financial circumstances.
Base rate drops, AGAIN, to 0.1%
The Bank of England Monetary Policy Committee (MPC) has made a unanimous decision to drop the Base Rate for a second time in just over a week, now to 0.1%.
The MPC acknowledged that, whilst the impact to the economy ‘should be temporary’, it would be a ‘sharp and large’ economic shock.
The step to further reduce the base rate has been taken with this in mind. Albeit, it follows a number of other measures including the previous drop in the base rate, a range of measures delivered in the Budget and the announcement of the Covid-19 Corporate Financing Facility.
In addition to this latest drop in the Base Rate, the committee agreed to increase holdings of UK government bonds by an extra £200bn.
What this means, in essence, is that the Bank of England is printing new money to support the economy.
Why has the base rate been dropped again?
Recent deterioration in the UK gilt market has been given as the reason for this further drop in the base rate.
The purchase of government bonds will happen “as soon as is operationally possible, consistent with improved market functioning.
Lender rate hikes – don’t miss a low rate deal
Whilst the Bank of England has again cut the Base Rate, now at 0.1%, in reaction to the impact of Coronavirus, some lenders are starting to review their mortgage products.
At least one lender has temporarily stopped offering buy to let mortgages and some have increased their buy to let mortgage rates.
Opportunities remain, but secure them for certainty
The backdrop to the buy to let marketplace has been one of incredibly low rates, for quite some time.
At the time of writing, the lowest fixed rate deal (taken from a range of over 80 buy to let mortgage lenders) is just 1.19% fixed for two years, at 65% loan to value. An exceptional rate of repayment by anyone’s measure.
At 75% loan to value, rates are from 1.52% fixed for two years. Whilst early exit fees and other costs apply, for property investors, the pickings have been rich.
The cost of borrowing and breadth of opportunity, in terms of criteria flexibility, has been driven by lenders, keen to offer opportunity and keep landlords in the market.
This attitude has remained the same, throughout a period of changes to regulation and tax.
Will your initial rate period end in the next 3-6 months?
Check your current mortgage documents. If the deal period of your mortgage is coming up on or before September 2020, you can start the process of securing your next deal right now.
A mortgage offer (not to be confused with a “decision in principle”) has a 3-6 month expiry date.
That means, whilst these exceptional deals remain available, you can secure an offer from a lender to secure another great mortgage product, which could see you through the turbulence of Coronavirus.
The team at Commerical Trust are on hand, as ever, to give you the information and guidance you need to identify the product which best suits your needs and circumstances.
Rate certainty is one thing that can bring a bit of peace of mind right now, it certainly doesn’t hurt to find out where you stand.
Are you buying property?
Investors who are seeking purchasing opportunities can also benefit.
With workplace adjustments being made there may be an impact on lender turnaround times, but our team remain focused on driving deals through to completion and smoothing the way on behalf of our clients.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.