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    Base rate cut

    The Bank of England has cut the base rate again on to just 0.1%. It is the lowest ever, in response to support the economy during the coronavirus crisis.

    Rates had already been recently reduced to half a percentage point earlier this month, however, at a meeting on 19 March, the Bank’s Monetary Policy Committee (MPC) decided that further measures were required to help the UK deal with the economic disruption caused by COVID19.

    Here’s what the latest Bank of England has cut the base rate could mean for your mortgage.

    Tracker mortgages

    Tracker mortgages follow movements in the base rate, so the new cut means you will see your monthly payments further reduce. Some tracker deals have a collar below which the rate are not able fall, so it’s worth reading the small print of your mortgage to see if you will benefit.

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    Fixed rate mortgages

    If you have a fixed rate mortgage, you won’t see any change in your mortgage payments. It should, however, mean that when your current deal finishes, you may be able to lock into a new rate that’s lower than the one you’re currently paying.

    There could be some improvement in fixed rates in weeks to come if funding costs remain low. Remember, that fixed rate deals are already very low, so it’s not guaranteed that they will fall drastically following the latest cuts.

     

    Variable rate mortgages

    If you have any other type of variable rate mortgage, or you’re currently paying your lender’s standard variable rate, there are no guarantees that the rate cut will be passed on in full – it’ll be up to the discretion of your lender.

    To talk about any of these options, or to just have a helpful chat about your current situation please contact us here…

     

    What is the Government Proposal?

    The full proposal is in detail below:

    • Mortgage lenders will automatically offer a 3-month mortgage payment holiday for its customers who are impacted, directly or indirectly, by COVID-19
    • The mortgage payment holiday will apply to those who are up to date on their payments, not customers in arrears and wanting to self-certify that they are impacted by COVID-19
    • It means that lenders will not use an income and expenditure assessment
    • It will also allow lenders to be responsive to customer and their needs It will offer forbearance in a simple way to their customers
    • Customers will be made aware of the fact that the interest will accrue in the holiday period and they will have to make up the payments deferred in the future
    • Customers who wish to undertake a full assessment of their ability to pay or financial difficulty may still do so.
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    Mortgage Payment Holidays: How do I apply?

    For all Mortgage Payment Holidays, we would suggest speaking to your mortgage adviser and not just assume automatically to take a holiday if the situation is not pressing. Lenders will be overloaded with calls and should be free to deal with the most urgent first.

    We will help you with your questions and see if there are any other options available to you.

    For a customer, up to date with payments, not in arrears and impacted by COVID-19:

    • the customer would contact the lender and inform them that they are impacted by COVID-19
    • the lender will accept details from the customer and offer an automatic 3-month mortgage payment holiday
    • no evidence will be sought from the customer
    • the lender makes the customer aware that interest will accrue and will be contacted at the end of the three months to complete an assessment of the customer’s circumstances
    • at the end of three months, an arrangement to pay will be agreed with the customer according to their circumstances to recover any shortfall, while ensuring that the mortgage remains affordable and sustainable
    • the lender lets the customer know that if they wished to complete a full assessment now, there may be other forbearance options more suitable to the customer.
    Mortgage Payment Holidays – Will it affect my Credit Score?

    Usually, mortgage payment holidays show up on your credit score as a negative mark, but most lenders have now said that for cases linked to the virus they will ensure that this does not happen.

    It is important you ask this question to your lender directly and record the response this will include the date and the name of the person you are speaking to avoid confusion later. Different lenders will do different things.

    What “Other Options” are available?

    There are some other options available, some lenders are offering a temporary switch to interest-only in order to reduce the monthly payments.

    It may not be that necessary to convert all your mortgage payment to interest only and it may be the case that placing part of the mortgage on this basis could give you some needed breathing space.

    Customers with savings may remortgage onto an offset basis could give them help by reducing their monthly payments whilst keeping their savings in place.

    For example, someone with a £500,000 loan and £100,000 in savings would only pay interest on £400,000 reducing their payments accordingly.

    To talk about any of these options, or to just have a helpful chat about your current situation please contact us here…

    England has cut the base rate.