Applications for remortgages are up year-on-year during April suggesting current homeowners are looking to save money with better rates, whereas first time buyer mortgage application figures plummet
During the coronavirus outbreak, mortgage enquiries dropped by 37% from March to April (lockdown) according to online mortgage broker Trussle.
However, the lockdown period has proved a popular time for current homeowners to reassess their current mortgage deal, with a 110% year-on-year increase of remortgage applications.
At a time when household finances are under pressure, remortgaging can save people £334 on average per month.
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 lockdown forcing 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.
Furlough scheme effect on mortgage applications?
Since the coronavirus lockdown came into effect, some 7.5m workers have been furloughed.
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, said: ‘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.’