In response to the pandemic, the Government has put in place a number of measures to try and keep the economy moving. These have included cutting the Bank of England base rate, mortgage payment holidays and a commitment to pay 80% of salary for employees affected by the pandemic.
Here we answer your common questions in relation to your mortgage and the Governments measures.
Will the cut in the Bank of England’s base rate affect my monthly mortgage repayments?
If you are on fixed rate then no, this base rate cut will not affect you. Your rate is fixed for the duration of the product so will be fixed for a 2, 3, 5 or 10 year period. It is important to remember fixed rates are at an all time low and have been for a number of months so you will have already benefited from the banks previous rate cuts which were made in anticipation of a market slowdown. You will be on a very competitive rate.
If you are on your lenders standard variable rate, then yes, this base rate cut will mean a reduction in your monthly mortgage repayments. However, if you are on standard variable rate, you are likely to be paying far too much for your mortgage borrowing. Standard variable rates are currently around 2% higher than fixed rates so we would strongly advise you to consider looking at other options.
If you are on a tracker rate, your mortgage rate will have been reduced. We would remind you that fixed rates are at an all time low, so would advise that you consider moving to a fixed rate if you want more certainty of your monthly payment amounts moving forward.
My mortgage is currently going through but isn’t yet complete – what should I do?
Your adviser will be working hard to get this over the line for you. He will be liaising with your estate agent and solicitor to keep your purchase moving. He will also be checking the interest rates available to you on a daily basis and should a better one become available before you complete, will discuss with you swapping to a more competitive product.
My remortgage is due (within the next 6 months), what should I do?
Whilst there is a great deal of uncertainty at the moment, one thing is very certain and that is that once your fixed rate product ends you will slip onto the standard variable rate. Standard variable rates are currently around 2% higher than fixed rate mortgages, so your monthly payments will increase if you slip onto standard variable rate. Whilst in times like this you may be tempted to do nothing, it really is important that you keep your finances on track. Ensure you have a remortgage review meeting and look at all of the options.
What is a mortgage payment holiday?
A mortgage holiday is a period of time whereby your lender pauses your monthly payments for a fixed period of time. Historically these have affected credit ratings. The Government recently announced that there would be a 3 month mortgage payment holiday available to anyone experiencing problems paying their mortgage because of the Coronavirus pandemic without it affecting their credit rating. Lenders are currently working on the specific details surrounding this. We will be updating our clients and our Facebook page as we get more information.
Please note that payment holidays will not constitute free money. Under Financial Conduct Authority rules lenders must ensure that any “forbearance” will still assume an eventual full repayment of arrears. Please contact your lender directly if you are having issues with mortgage payments.