Covid-19 has had a massive impact on the mortgage marketplace, with some lenders withdrawing altogether and thousands of products withdrawn from sale. The outlook is not as gloomy as you may imagine if you need to remortgage.
If your current deal is about to end, ends later this year, or if you want to
remortgage to consolidate commitments and reorganise your finances, what options are there, and what should you do?
If your mortgage deal is ending soon
Firstly, if your current deal ends imminently, whilst there has been a reduction in the number of lenders and products, many of those withdrawn are for house purchases or higher-risk lending.
Most lenders continue to offer product-transfer deals for existing customers; many still offer remortgage deals for new customers, and we can arrange these for you without any advice fees. So we can typically advise you on options from the whole of the market and your current lender simultaneously.
If your income has fallen, this might affect your ability to change lenders but would not prevent you from transferring deals with your existing lender.
If your mortgage deal is ending within the next 6-months
For anyone whose existing deal ends by late Autumn, now is an ideal time to think about remortgaging.
Several lenders’ remortgage deals are valid for six months, so you can apply well in advance, taking advantage of the low current rates and arranging everything ready to switch over as soon as the current mortgage deal expires.
There are several reasons why doing this now could be wise. Firstly, although lenders have not passed on the full rate reduction made by the Bank of England into new fixed-rate mortgage deals, there is a good chance that this never happens.
With vast financial losses in every industry, it is difficult to imagine lenders vying to cut into vital profit margins when rates are already at all-time lows.
Conversely, we could see a reduction in house prices or even lenders pulling out of the market entirely, creating a situation where you were better off applying today than in several months.
No one has a crystal ball to predict how the market will progress over the year, but the likelihood of rates getting significantly better than today seems dim.
Consolidating credit commitments into your mortgage
This is where the remortgage market has already shrunk significantly. So, if you want to trim down your outgoings and reduce your typical monthly commitments, it may be wise to act now rather than wait.
Be aware, though, that consolidating credit commitments into a mortgage often presents poor value for money. And may be more expensive than alternative options, like balance-transfer deals or converting credit card debts into a personal loan.
It is also important to note that you often convert unsecured credit commitments into one secured against your home. That means you stand to lose your most precious asset if you default, where previously, there may have been no risk of this at all.
We can help you understand whether a debt-consolidation remortgage is the correct solution for you.
Changing your mortgage term
You do not necessarily have to wait to remortgage to alter your mortgage term and, therefore, your monthly payments (for anyone on a repayment loan).
If this is something you want to look at, you can speak to your lender, and you may be able to do this midway through an existing deal, even if you have early repayment penalties.
Again, you can possibly change the term when you remortgage or product transfer, and if you want to reduce your outgoings in this way, get in touch to discuss your options.
If you are in financial difficulty
If you are experiencing difficulty making payments, your first port of call should be your existing lender to discuss options to prevent you from getting into arrears, including the government’s payment holiday scheme.
If there is a risk of you defaulting on obligations like a credit card, loan, hire purchase or other non-secured credit commitments, then consolidating these into your mortgage is a potential solution.
But this increases the risk of losing your home by converting unsecured commitments into secured debt.
We can help you get an understanding of whether consolidating commitments is a solution that could be viable for you.
But you should consider speaking to stepchange.org & the Citizens Advice Bureau about the implications of getting into arrears on either type of commitment and other options that may be available, such as an IVA.