The Bank of England embarked on another round of monetary easing last week, by cutting interest rates from 0.25% to 0.01%, the lowest in the central banks 325-year history to counter the intensifying economic crisis caused by the coronavirus outbreak and increase it’s holdings of UK government and corporate bonds by £200 billion
On 19th March, the Monetary Policy Committee had a special meeting and voted to the latest measures in cutting the Bank rate to 0.01% to help businesses and individuals cope with the economic damaged caused by the virus and in addition, BoE also announced the launch of a £200bn quantitative easing (QE) bond-buying programme in it’s latest emergency action plan to mitigate the economic impact and lower borrowing costs further. The BoE voted unanimously in favour to increase the Bank of England’s holdings of UK government bonds sterling non-financial investment-grade corporate bonds.
The move came as the central bank and the government announced to raise the money supply, influence asset prices and ease the burden on borrowing costs, providing banks with low-rate loans to pass on to small and medium-sized businesses and individuals.
How are lenders reacting?
It comes as lenders and borrowers are facing unprecedented conditions, property surveyors haven’t been able to carry out physical inspections, which has been banned during the lockdown. Some lenders announced that they are working with mortgage valuation partners to find innovative solutions, which means in the coming weeks, we could see lenders accepting automated or desktop valuations.
Can borrowers still look at obtaining a mortgage?
The answer is yes! Although over the past week, some of the UK’s largest lenders within the mortgage industry withdrew all products above 60% loan to values (LTVs). In the matter of days, one of the leading lenders and trend setters of the mortgage market, Halifax, evaluated it’s position and came back stronger with products up to 80% LTV.
This could be vote of confidence and one that will hopefully encourage other major and smaller lenders to follow the lead.
From our view, although they may be a limited number of products on the market at this moment in time, however, the mortgage market is still functioning and banks are still lending. Speaking to a specialist mortgage broker, we can discuss your current circumstances and guide you through the process.
Tracker and Variable Rate Mortgages
Borrowers with tracker and variable rate mortgages could see a reduction in their interest rates. However, it is critical that if you are on tracker rate mortgage, you will need to check the terms and conditions on your mortgage and see if you have what is called a “collar”. A “collar” prevents a mortgage rate from falling below a certain level. If you have a variable rate mortgage, a lender’s standard rate (SVR) – it will be entirely down to the lender to see if you get a lower rate in the response to the interest rate change.
Fixed Rate Mortgages
As the name suggests, you won’t see a change during the fixed rate and wouldn’t be affect by recent base rate change. If your initial period is soon coming to an end, it might be a good time to look into a remortgage.
While we are seeing last week, hundreds of home purchase loans being withdrawn from the market, remortgage deals are still available. If you have more than 20% in equity in your home and your current mortgage deal (i.e. the initial period) is coming to an end, this could be the ideal time to look at remortgaging your home. Although if you are going down this route, it can take up to eight weeks, so it’s best to start thinking about it well in advance. Seek professional advice if you are looking to re-mortgage your property.
First Time Buyers
Young homeowners and first-time buyers could face being locked out after banks and building societies announced low-deposit mortgages have been cut. This could mean, those prospective first-time buyers seeking to get a mortgage, may need a 40% deposit to fund a mortgage deal.
With the recent major changes, now is an important time to find the right lender and product that fits your needs. If you are looking for professional advice and would like a free chat about your current circumstances, call Paul on 01902 213201.