Mortgage advisor warns of risks and opportunities during COVID

A mortgage advisor is urging people who want to buy a property to act now – before the stamp duty holiday runs out.

Matt Colley, of Moving Experience in Bristol, has seen a surge in people looking to move due to lockdown and a temporary cut to the stamp duty land tax.

But the holiday ends in March and, with the average house purchase taking up to 12 weeks, he is advising people to act now.

Matt, who is currently waiving broker fees for medical staff, military personnel and veterans, said help is also at hand for homeowners hit by COVID.

Stamp duty

He said: “There has been a mini-boom in the housing-market but this could come to an end when the stamp duty holiday ends in March.

“Groups cooped up together for long periods of time and working from home has been another incentive to move.”

Buyers can currently save up to £15,000 - but there could be a downturn in sales as the holiday and furlough support both come to an end in March.

Matt, who has worked in financial services for over two decades, said: “Buyers are now factoring in a room for office space or the possibility of an outbuilding in the garden, for example.

“There are things you can do to make your property more attractive to buyers at this time, but the main thing if you’re thinking of moving is to recognise the time constraints and take action and get on with it while the market is strong.”

The average house buying process tends to take at least 12 weeks and involves several parties, including lenders, solicitor and mortgage advisors.

Estate agents can still work during lockdown and hold house-viewings in England, provided they follow government guidelines. 

Matt, who lives in Fishponds, said: “Now is the time to do your homework, make sure the relevant paperwork is in place and look to appoint the necessary people.”

COVID hit income

Matt, who is fundraising for charity after his two boys’ lives were saved at Southmead Hospital, recognises some people may be struggling to pay their current mortgage.

He said: “I’ve had some people contact me because they are worried about the future of their jobs and income

“It helps to know your options so that you have a plan – rather than mounting fear and anxiety. Speak with your lender straight away and they can take steps to help you.”

Some people have lost their jobs due to COVID or have been placed on furlough, receiving 80 per cent of their wage.

There are no guarantees furloughed workers will be able to return to work, so they pose a risk to mortgage lenders and this may limit their options.

Matt said: “When it comes to reviewing an existing mortgage, it may be more difficult to negotiate with a lender or explore the market in the same way.

“Rates may be slightly higher but there are still attractive options. We have found that lenders want to retain and support customers and are being flexible in the current circumstances.”

Borrowers impacted by coronavirus can take a six-month mortgage payment holiday.

People who have already started a mortgage holiday will be able to top up to six months without this being recorded on their credit file.

Mortgage holiday

For every month you take off from making payments, the size of debt increases by that amount, along with interest for that time-period.

Earlier in the year, to calculate the real cost of a mortgage holiday, Matt created and compared two mortgage illustrations.

If a three-month holiday was taken for a loan of £222,000 with 23 years remaining, the balance would rise to around £225,000 after the holiday and this cost an extra £1,400 in interest.

Matt, who has been a mortgage advisor for nearly 20 years, said: “There is a short-term gain, but there’s also some long-term pain, and you need to ask yourself if it’s worth it.

“If you are struggling to pay your mortgage at this time, then such a holiday is likely to be the better option.

“The effect on your monthly repayments will be relatively small, but costs increase over the lifetime of your mortgage.”

Repossession

Matt, whose firm in Aardman Animation Studios in Gas Ferry Road also provides protection cover for events such as sickness and death, said repossession is likely to be a last resort for a lender.

He said: “People may see lenders as a faceless body, and there’s a misconception that lenders are looking to repossess their house straight away. But in our experience, they generally want to help their customers.

“Lenders want to lend money and make interest. It’s not good business to repossess homes, which leads to fees and hassle. If you speak to them early on, they can look at your options.”

Options may include taking a mortgage holiday, reduced capital or interest only payments for an agreed time or an extension on payments.

It may also be possible for some people to downsize and pay for the next property with cash if you have enough equity. Taking out another mortgage, even for a smaller amount than you have now, would involve meeting certain criteria.

Buy-to-let

Matt, who has a quarter of his customers managing buy-to-let properties, said the current market may be best suited to those looking to make a long-term investment.

He said: “The buy-to-let market is not for everyone. Those with portfolios and funds in reserve are looking to make money back in 10 to 20 years. Buy-to-let is not suited to the risk averse or those looking to make money in one to two years.”

He said those with savings may be better off paying part of their mortgage, as opposed to putting money into savings products, which currently offer a lower return on interest rates.

He said: “Investing in property could be problematic if you think your income is at risk in future. Paying off more of your mortgage, if possible, could be a safer route to take.”