How has Covid-19 impacted mortgage choice?
Mortgage product numbers have dramatically fallen from 5,222 in March to 2,748 on 26th June, according to Moneyfacts.
The financial information provider said that those borrowers with a small deposit faced a particularly limited choice, with the number of mortgages up to 90% of the property’s value having been decimated during lockdown.
In March there were 779 mortgages available to borrowers with a 10% deposit, but this has fallen to just 72 today.
There are currently only 14 mortgage products for those with just 5% as a deposit, compared to 400 earlier this year.
The good news is that average mortgage rates have also fallen, but this is partly because higher-risk, and therefore more expensive products, have been pulled from the market, pulling down the average.
Moneyfacts said that two-year fixed rates have fallen from 2.44% at the start of the year to 1.98% today, while five-year fixes are down from 2.74% to 2.23% over the same period.
Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “The difference between the average standard variable rate and the average two-year fixed deal is now 2.50%, so those who have delayed switching may wish to move promptly now, as significant savings could be made whilst rates remain at record lows.
“Those who took advantage of the lifeline of a three-month payment holiday at the beginning of the coronavirus pandemic will now find that this is shortly due to end. While it is now possible to request a further payment holiday extension, for those who are eligible, returning to full mortgage payments as soon as possible is wise in terms of the overall cost to the consumer.
“Borrowers returning to full monthly repayments after a three-month payment holiday could potentially see their monthly mortgage repayments increase by approximately £14.00 per month. Consumers also need to be aware that this does not include the impact on the total outstanding balance and interest accrued.
For those who are still struggling financially, talking with their lender and exploring other options such as partial repayment holidays may be a good idea to reduce the long-term financial impact.”