The importance of a mortgage broker

KEEPING monthly outgoings to a minimum is a priority for your finances -especially in such uncertain times as we face today. Since your mortgage is likely to be the biggest payment each month, it makes sense to pay the lowest amount of interest possible, that’s where a mortgage broker can help.

That means finding the best value mortgage available to you.

Borrowers that have an existing loan due to expire soon might be concerned that they might not be able to get a new home loan at the moment. Indeed, the mortgage market is by no means business as usual right now. That doesn’t mean you can’t find a good deal – even if your income has taken a hit – it just might take a little more time and effort.

That’s why having a mortgage broker on your side can be invaluable. Brokers are up to speed on which lenders are offering what, and the changes that are happening more than usual at the moment.

That means they are perfectly placed to help individuals find the best lender and mortgage deal for them.

So what are the latest challenges in the mortgage market?

Changes to lending policy

In the last few weeks, the criteria used by banks and building societies used to decide if they should approve a loan has chopped and changed.

Lenders are concerned about dishing out money to homeowners that have suffered financially as a result of coronavirus.

Up to 27% of the UK’s workforce has been furloughed, according to the Office for National Statistics.

There’s no universal way in which lenders are dealing with furloughed borrowers.

They are still accepting mortgage applications from borrowers who have been furloughed.

But the amount you can borrow will most likely be lower than if you were earning your full salary. They might insist on written confirmation of the terms of the temporary pay cuts by their employer.

While some employers are topping up workers’ salaries up to 100% but this doesn’t mean that a lender will use this figure to base their calculations on when they work out how much you can borrow.

Variable income such as commission, overtime and bonus payments would count towards working out how much you can borrow – but many lenders have temporarily decided not to accept this kind of income on applications.

Credit scoring could be tougher as lenders become more cautious, as they were after the 2008 financial crisis.

Those who’ve been furloughed may think they will be better off waiting until they have returned to work depending on their circumstances. But talking to a fee-free mortgage broker costs nothing and so it might be smart to start investigating what can be done for you sooner rather than later.

Challenges in getting valuations

For those wanting a mortgage on a new property, things have understandably stalled. One reason behind this is that homes cannot be valued in person.

The coronavirus lockdown has left an estimated 373,000 home sales in the UK on pause with many struggling to sell because homes cannot be visited by a qualified surveyor.

Many lenders are reluctant to approve mortgage applications unless they have a accurate property value via a report following a physical visit.

However, there is a sign of movement from lenders who realise that things might not be able to get back to normal for some time.

Mansfield Building Society, for example, has already agreed to accept the virtual valuations on purchase and remortgage applications up to 75% loan-to-value for residential mortgages, and 70% LTV for buy-to-let.

It is hoped others will quickly follow suit.

For buy-to-let mortgages, Shawbrook and Paragon examples of lenders that are using virtual valuations for loans against standard properties up to 75% loan-to-value.

Hiten Ganatra, managing director of mortgage brokers Milton Keynes Visionary Finance, says: “It’s an uncertain time for all at the moment and things are changing so quickly week by week.

“The good news for borrowers is that with the record low Bank of England base rate, now at 0.1%, the cost of mortgages has fallen. A number of lenders, including Nationwide and HSBC, have cut rates during lockdown.

“Plus, lenders are starting to acknowledge that they need to be more flexible when it comes to valuations so that the whole market doesn’t come to a complete standstill.

“Whatever changes are ahead when it comes to mortgages, a mortgage broker can provide support for those who want to get the best deal on a remortgage, whether you’re a homeowner or buy-to-let landlord, and for those wanting to buy a home.”