ONE IN FIVE HOMEOWNERS UNABLE TO REMORTGAGE DUE TO FINANCIAL IMPACT OF PANDEMIC

Published: 19/03/2021
  • 19% of homeowners unable to remortgage their home since the pandemic began
  • Almost a quarter (23%) of first-time buyers saw their mortgage lender reduce their initial loan-to-income offer
  • However, three-quarters of homeowners (75%) are confident they will sell at the asking price
  • Extension of stamp duty deadline should benefit nearly two-thirds (65%) of first-time buyers and three-quarters of homeowners (75%)

18th March 2021 – Nearly one in five of UK homeowners (19%) have been unable to remortgage their home since the pandemic started and could now face higher monthly mortgage repayments as a result, according to comparethemarket.com’s latest Household Financial Confidence Tracker.

The impact of the pandemic on employment and financial stability has meant that many households have become ineligible for competitive fixed rate deals. More than two-fifths (41%) of households unable to remortgage said their application was rejected because they had lost their jobs, and one-third (32%) said it was because they had been furloughed. A quarter (26%) of homeowners thought their application was rejected because of a salary cut.

Being unable to remortgage at the end of a fixed mortgage term means lenders are likely to transfer borrowers onto a higher standard variable rate (SVR). Households could see their monthly mortgage payments rise by hundreds of pounds each month on an SVR, which in turn has significant repercussions on the ability to pay household bills and meet other financial commitments. 

In the Budget on 3rd March 2021, the Government confirmed the launch of a mortgage guarantee scheme for lenders to small deposit holders to help to promote choice and competition in the mortgage market, particularly for first-time buyers. Some lenders have already signed up to offer these from April 2021.

comparethemarket.com has information on 5% deposit mortgages, how Covid-19 has affected the mortgage market, and guidance on how to choose an appropriate mortgage here.

This announcement should be good news for first-time buyers who have seen their mortgage offers reduce or disappear completely over the last 12 months. One in five (19%) first-time buyers tried to buy a property only to see the deal fall through, compared to 14% who successfully bought a home. When asked why the transaction did not complete, a quarter (23%) said their provider reduced their initial loan-to-income offer, 18% said their mortgage provider had increased their initial interest rate, and 18% claimed their mortgage lender asked for a larger deposit than originally required.

The original stamp duty holiday deadline (March 31st 2021) also played a significant role in property transactions falling through, affecting 21% of first-time buyers and 28% of homeowners. However, as announced in the Budget, the stamp duty holiday has been extended until the end of June, with a three month taper, which nearly two-thirds (65%) of first-time buyers and three-quarters of homeowners (75%) believe will benefit them.

Mark Gordon, director of mortgages, at comparethemarket.com, comments:

“The pandemic does not yet appear to have had the decimating impact on house prices which many initially predicted; In fact, three-quarters (75%) of homeowners are confident they will sell their homes at the asking price. However, this does not mean that it is easy to get on, or move up, the property ladder. Household finances have been put under severe strain this past year and many families have found themselves in a more precarious position when it comes to their jobs and income. This can have a direct impact on mortgage repayments – often our largest monthly outgoing – and the ability to buy a property.

“Being unable to remortgage means some households will roll onto a lender’s SVR rate, and, over the years, could lose out on thousands of pounds in higher interest charges. If you can’t remortgage with your current lender, it is worth doing some research and seeing if you would be eligible for a fixed rate deal with another lender or speaking with a mortgage broker.”

ENDS

Notes to editors

Research based on Censuswide survey of 2,000 UK adults (1,000 homeowners & 1,000 first-time buyers) conducted 19-23 February 2021

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