- During the coronavirus outbreak, mortgage enquiries dropped by 37% from March to April
- 35% year-on-year decrease in mortgage applications during April from first time buyers
- Applications for remortgages up 110% year-on-year during April suggesting current homeowners are looking for to save money with better rates
New data from online mortgage broker Trussle has revealed the startling impact that the coronavirus lockdown has had on the UK mortgage market. In stark contrast to the beginning of the year, Trussle saw mortgage enquiries plummet by 37% from March to April, just as the UK’s lockdown measures came into full effect.
The coronavirus pandemic also seems to be disproportionately affecting first time buyers, with mortgage applications down by 35% year-on-year during April and a 53% decrease in submissions between March and April 2020. This could be due to a number of reasons. The current, and rather sudden, lockdown resulted in an end to physical valuations, and as a consequence, borrowers were being turned away as many lenders could no longer accept applications with a higher loan-to-value. This also began to affect workers who have been furloughed or taken a cut to their income.
How has the furlough scheme affected mortgage applications?
Since the coronavirus lockdown came into effect, some 7.5 million workers have been furloughed. Trussle has seen applications by furloughed workers being handled by lenders on a case by case basis.
Generally, lenders are willing to accept furloughed income, providing applicants have confirmation from their employers that they will be going back to work. However, most lenders will only consider furloughed workers’ reduced salaries. As such, being on furlough may affect how much you can borrow. Prospective home buyers on furlough still wanting to explore a house move should seek professional advice from a broker.
The furlough scheme is also impacting mortgage applicants across the wealth spectrum. High earning furloughed workers are experiencing their own difficulties when trying to secure a mortgage. For this bracket of home buyers, the scheme’s cap of £2,500 per month has meant some of their salary is instantly discounted by lenders, meaning more expensive homes might be off limits until they are able to return to work.
Miles Robinson, Head of Mortgages at online mortgage broker Trussle, commented:
“As the coronavirus crisis continues to impact people’s livelihoods, those who have been furloughed are naturally likely to be concerned about their mortgage applications.
During these difficult times, many lenders will only consider 80% of a furloughed customer’s income in affordability calculations, provided that the applicant has confirmation that they’ll be going back to work. As there’s a monthly cap of 80% of salary paid up to £2,500 for furloughed workers, people earning more than this will be impacted more significantly. Many lenders are also hesitant to consider overtime and bonuses at this point in time as it is certainly not guaranteed income”
While other lenders won’t accept furloughed customers at all, we’ve seen flexibility from those who are accepting customers on furlough and we’ve helped a number of customers in this position to secure mortgages. The criteria has been changing frequently during these times, so anyone who has been furloughed should seek professional mortgage advice.”
In contrast, the lockdown period has proved a popular time for current homeowners to reassess their current mortgage deal. Trussle has seen a huge 110% year-on-year increase of remortgage applications. At a time when household finances are under pressure, Trussle has found remortgaging can save people £334 on average per month. Mortgages are often the biggest monthly bill that people face and it’s worth using a remortgage calculator to see if switching could save you money.
