19% of homeowners haven’t been able to remortgage their home since the Covid pandemic started and could now face higher monthly mortgage repayments as a result, according to comparethemarket.com’s latest Household Financial Confidence Tracker.
41% of households unable to remortgage said their application was rejected because they had lost their jobs, and 32% said it was because they had been furloughed. 26% of homeowners thought their application was rejected because of a salary cut.
A switch to a standard variable rate (SVR) could see householders’ monthly mortgage payments rise by hundreds of pounds each month, which in turn has significant repercussions on the ability to pay household bills and meet other financial commitments.
comparethemarket.com said the mortgage guarantee scheme, announced in the Budget, should be good news for first-time buyers who have seen their mortgage offers reduce or disappear completely over the last 12 months. 19% of 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, 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 (31 March 31 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 65% of first-time buyers and 75% of homeowners believe will benefit them.
Mark Gordon, director of mortgages at comparethemarket.com, said: “The pandemic does not yet appear to have had the decimating impact on house prices which many initially predicted; In fact, three-quarters 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.”