Mortgage market update: Coronavirus crisis
The Coronavirus crisis is unprecedented and its impact felt across every sector.
The housing market is all but locked down, with the government halting home moves unless they are critical.
There’s still a remortgage and product transfer market, of course, but lenders have operational difficulties as staff self-isolate and many try to work from home.
To add to the challenges, lenders are experiencing huge demand from borrowers, who want information on payment holidays and other aspects of their borrowing.
Plus, mortgage providers have agreed to extend mortgage offers where completions have to be delayed because of the government measures.
Throw in the fact that surveyors are not able to do physical home inspections to provide valuations on remortgages and legal firms are not operating at full capacity, and there’s huge hurdles to overcome.
It’s no surprise that products have been affected, as Moneyfacts has noted in its latest update.
The financial information provider found that the number of available mortgage products has dropped massively, from 5,239 on 11th March to just 3,654 today.
Some lenders have limited their ranges for new customers to those products available for remortgage borrowers only, not home purchase.
They have also reduced their exposure to risk by withdrawing their higher loan-to-value (LTV) products, with some providers now offering deals at a maximum of 60% LTV.
Average standard variable rates are currently 4.76%, down only slightly from 4.9% in January.
Two-year fixed rates are now an average 2.37%, while five-year deals average 2.68%.
For borrowers nearing the end of their current deal, it makes sense to look at remortgaging to avoid reverting onto a higher standard variable rate.
Eleanor Williams, finance expert at Moneyfacts.co.uk, explained: “With so much uncertainty at the moment, providers seem to initially be focusing on the support that their existing customers may need in the coming weeks.
“However, there may still be borrowers sitting on their provider’s standard variable rate (SVR) waiting to see what the impact of these rate cuts will be and by how much their monthly payments will reduce.
“With the difference between the average two-year fixed mortgage rate and average SVR standing at 2.39% today, the benefit of switching to a new deal while rates are low is evident for those eligible, and would protect these customers from interest rate volatility in the future.”