Applying for a Mortgage; the Latest News and Advice

This year, despite everything, the housing market has broken record upon record when it comes to sales volumes and property values. As the market continues to be incredibly busy, and the Land Transaction Tax Holiday deadline gets closer, what's the latest update on mortgages and mortgage applications?

Rightmove spoke to a professional mortgage adviser Kerry Wagner from the Mortgage Advice Bureau, and here's what they learned...

Are banks lending as usual?

In spite of the unusual year we’ve had, there haven’t been any major changes to how banks lend.

One positive thing is that they certainly are lending. Mortgage approvals are the highest they’ve been since 2007 – partly as a result of demand that’s been building up since earlier this year, and partly because of the stamp duty holiday that’s in place until March next year.

Perhaps the most significant change is to the amount many banks are lending – mortgages with a loan-to-value of more than 85% are not common at the moment, meaning that buyers who have saved up for less than a 15% deposit may struggle to find a suitable mortgage for them. (More on this below)

Most banks and building societies have had to tweak how they assess whether someone can afford a mortgage or not. For example, buyers who work in industries that have been most hit by the coronavirus – such as in hospitality or tourism – may need to jump through a few more hoops in order to convince lenders that it’s safe enough to lend to them.

Some banks may also re-examine how they calculate earnings that are additional to a base salary, such as commissions or bonuses. Others have specific policies in place for applicants who are, or were, furloughed for some time.

Each application is taken on a case-by-case basis, and different lenders have different rules, so it’s very important that you do your research, or speak with a financial adviser.

Is it possible to find 90-95% mortgages?

At the moment these are harder to come by, but Kerry told us some deals do come around every now and then – it’s a matter of staying tuned and knowing where and when to look.

“Every once and a while a lender will put out a ‘flash deal’ for a 90% mortgage that will last 48 hours or a week, but a lot of the time they’re not widely publicised”, Kerry explains.

Kerry recommends considering using a mortgage adviser as they might be able to help you find a mortgage with a higher LTV.

What can I do to improve my chances of getting approved?

The two most important factors that a lender will take into account when assessing if, or how much, they will lend you, are these:

The size of the deposit
This determines how much they will lend you. The bigger the deposit, the less they lend, so the smaller the risk.

Many experts’ advice is that it’s worth waiting a little longer to buy a home if it means you’ll have a larger deposit. It increases your likelihood of getting approved, and will probably get you a better mortgage deal, with a lower interest rate.

Your credit rating

It’s about having some credit, but not too much. Having large unsecured debts genuinely reduces your chances of getting accepted for a mortgage, so it’s best to consider how much of that you can trim down.

But having some credit, where you can demonstrate a good track-record in things like managing a credit card, paying for your car, etc. are all healthy things for your credit score.

Kerry brought up an interesting point. “This year many people spent less money on things like going out, holidays, changing cars, etc., which is great because they could save more. But this also meant that many people stopped using credit altogether, and surprisingly this can have an adverse effect on one’s credit score.”

“Banks like to see that you’re good at managing your credit, so it may be a good idea to use some credit even if you don’t necessarily need it.”

How long is it taking for mortgages to get approved?

Because of the increased activity in the housing market, and the higher number of applications being processed, it’s safe to assume that it will take longer than usual.

Kerry tells us that it’s taking an average of 4-6 weeks, though it can vary from application to application.

Remember, though, that the mortgage application is only a part of the process. Currently, it’s a good idea to allow around three months for the conveyancing – that is, the time it will take between and offer being accepted and exchanging contracts.

So, is there anything you can do to speed things up?

Kerry’s opinion is that the most important thing you can do to help things move as swiftly as possible is this: have your Mortgage in Principle in place before you start viewing properties.

This will give you a huge head start when you find the property you’ve been looking for. If you haven’t done this, you could add weeks to the waiting time, and it will lower your chances of having your offer accepted, because sellers typically prefer to go with the buyer who they believe will move quickest.

And here’s some great advice that will help your offer get accepted, which will also save you time.


Disclaimer: The information and opinions provided in this article are not intended to be financial advice and should not be relied upon when making financial decisions. Please seek advice from a specialist mortgage or financial provider. Our Independent Mortgage Adviser Suzanne King of SMK Mortgages would be more than happy to help, her details can be found here.


Source: Rightmove

Posted on: 4 December 2020