Mortgage lenders are to give three-month mortgage offer extensions to home movers, enabling them to move at a later date. The emergency measure comes amid the UK battling with the spread of coronavirus (COVID-19) – with Prime Minister Boris Johnson announcing stringent measures to slow the spread of the virus this week – putting the UK into a lockdown.
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It means that currently, members of the public have been told they cannot leave their homes unless it’s for one of a number of specified reasons – such as to purchase food or to provide care for the vulnerable or elderly.
The measure came following government advice for certain people to self-isolate, and the rest of the UK being told to practice social distancing.
Following the mortgage offer extension announcement, Stephen Jones, Chief Executive of UK Finance, said: “Lenders recognise that many people looking to move into their new home are facing significant stress and uncertainty due to the impacts of coronavirus.
“Current social distancing measures mean many house moves will need to be delayed.
“It is clearly not appropriate for people shielding or self-isolating to move home.
“Therefore where chains contain people in these groups, lenders, conveyancers and other professionals are working together to enable these customers’ moves to be delayed.
“Where people have already exchanged contracts for house purchases and set dates for completion this is likely to be particularly stressful.
“To support these customers at this time, all mortgage lenders are working to find ways to enable customers who have exchanged contracts to extend their mortgage offer for up to three months to enable them to move at a later date.
“If a customer’s circumstances change during this three month period or the terms of the house purchase change significantly and continuing with the mortgage would cause house buyers to face financial hardship, lenders will work with customers to help them manage their finances as a matter of urgency.”
Robin Fieth, Chief Executive of the Building Societies Association (BSA) said: “Lenders and borrowers face an unprecedented set of circumstances. People who would have been preparing and expecting to move house in the coming weeks now face a wait until Covid-19 restrictions can be lifted.
“Our hearts go out to them and our heads are clear that it would be unfair for these people to have to start their mortgage application all over again once life returns to a more normal state.
“A three-month extension of existing mortgage offers seems a fair and reasonable step to take.
“It is possible that some borrowers financial circumstances may change during the three months.
“If this happens, or the terms of the purchase change we will work closely with the borrower to achieve a sensible outcome.”
Ahead of the announcement, Nick Morrey, Product Technical Manager at mortgage broker John Charcol, spoke to Express.co.uk about different options home movers may have.
“If someone has exchanged contracts awaiting completion then they can look to defer completion with the agreement of all parties involved (as there may be a chain). That would allow the lockdown to finish and for people (especially in this case removal companies) to be in a position to physically move personal belongings,” he said.
“Or, again, with the approval of all parties involved, the monetary completion could take place but the physical exiting of properties not take place until a later date.
“The second option is not preferred by solicitors or lenders as it means that the wrong people are living in the wrong properties and that might invalidate buildings insurance policies. So the first option is the most likely.
“In either event, all parties should immediately check for any completion deadline on their mortgage offers. Most lenders give at least three months to complete, some up to six. Some current Halifax products have completion deadlines that have now been extended to September 30 – the full six months.
“But if the mortgage offer expires then it will have to be renewed and that means technically it has to be re-credit scored and possibly re-underwritten, but almost certainly a revised mortgage valuation.
“This could be a problem if someone’s credit score has fallen, or if they have missed payments on any financial commitments such as credit cards, or if the property has fallen in value thanks to a collapse in demand, causing the loan to value to change too much (rise).
“If the LTV goes into a different bracket then you will have to select a new product which is likely to be at a higher rate of interest.
“Home movers in these situations should talk to their broker or lender and ask what options they have before making a decision.
“In addition to this they should be careful not to volunteer any payment holidays they may or may not be thinking about taking unless asked since if a lender hears that an applicant could be in financial trouble they may withdraw the mortgage offer entirely, which could leave home movers in a very awkward and costly position.”
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