How is The Pandemic Affecting Mortgages?


The current pandemic has had a massive and continued effect on all elements of the UK economy including the housing market.

09 March 2021

The current pandemic has had a massive and continued effect on all elements of the UK economy including the housing market. As restrictions will at some point start to lift and with the property market in full swing, we take a look at what this means for you and the mortgage options available to you.

Mortgage Options At Highest Level Since First National Lockdown

With lenders having regained confidence during lockdown#3, homebuyers and property investors seeking mortgages now have the highest level of mortgage options available since March 2020 when the UK experienced lockdown for the first time.

How is The Pandemic Affecting Mortgages?

At the beginning of the lockdown, Experian stated that mortgages were affected in the following ways:  

  • Mortgage approvals fell – due to lenders being unable to carry out physical valuations of properties. 
  • Lenders tightened their lending criteria – many increased the deposits they require for their mortgages.
  • Some lenders pulled mortgage deals from the market because of the uncertainty. This limited options for customers.
  • Mortgage holidays boomed – over 1.6m homeowners took a break from repaying their mortgage.
  • Interest rates fell – the Bank of England cut the base rate to 0.1%  and mortgage interest rates fell.

However, more recently, the number of mortgage deals on the market has risen and we now have the highest level of options available since the start of the pandemic. Conveyancing Expert explains what is happening to the market and considers whether it really is becoming easier to get a mortgage and if so, why.

New Ranges Of Mortgage Available

Many lenders have launched a range of new mortgage options for property buyers. There are now 3,215 mortgage deals available according to Moneyfacts, the highest number available in 11 months. There had previously been 5,222 deals available on the market.

In the first half of 2020, mortgage options fell sharply. Many lenders even withdrew mortgages altogether while they assessed the level of risk they could take due to the effects of the COVID-19 pandemic. In particular, those with smaller deposits had much fewer mortgage deals available.

During the latter half of 2020, the market started recovering. Since October, the number of mortgage options has risen by 42%, the biggest four-monthly increase since 2007 .

Furthermore, the end of 2020 saw mortgage approvals at their highest level since 2007. The housing market remained busy as homebuyers and property investors have been rushing to beat the stamp duty holiday deadline.

Mortgages With Smaller Deposits

Choice in mortgages is on the rise especially for borrowers with smaller deposits. In recent months, the most significant rise in products was for 90% loan-to-value (LTV) mortgages, where borrowers only need to put down a 10% deposit is typically used by first-time buyers.

90% LTV mortgages are usually considered a higher risk for providers. Willingness to extend lending in this risk bracket could signify that lenders have confidence in the sector, despite ongoing, wider economic uncertainty. 

This is reinforced by the average two and five year fixed rates at 90% LTV seeing the largest fall of all the lending brackets, reducing by 0.09% and 0.07%.”

Mortgage Rates Stabilising

Mortgage rates have not become cheaper despite the wider availability cheaper. They are still rising slightly, with two-year deals continuously on the increase. The speed of the increase is slowing down though; lower rates could be on the horizon.

Average interest rates have in fact increased across all LTV but only fractionally, which shows stabilisation. This is possibly due to increased competition and lenders are gaining more confidence, becoming less risk averse than before.

Choosing The Best Deals

Conveyancing Expert advises homebuyers to consider a number of factors when choosing a mortgage deal. Although the interest rate is important, It’s also crucial to take product fees and incentives into consideration.

Two-year fixed products have been particularly popular of late. These typically have lower interest rates than five-year fixed deals but for some, a five-year option could be a better choice in the long run. 

As the economy and mortgage market remains uncertain, five-year fixed deals could provide longer-term stability though this depends on the borrower’s specific needs. 

Is It Getting Easier To Get A Mortgage?

Whilst greater availability and longer lasting deals are good news for borrowers, it remains a complicated time to get a mortgage. Whilst lenders are starting to ease the strict rules they introduced during 2020, there are still some hurdles. 

Always seek independent financial guidance to find the best mortgage deal for your circumstances. Your dedicated expert conveyancing solicitor will assist you with advice in this matter. 

Conveyancing Expert are renowned for delivering excellent and efficient legal and conveyancing services. Our goal is to ensure your purchase, sale, re-mortgage or transfer of equity, is completed to the highest standards with the support of our expert conveyancing advice.

To discuss any of the above or if you have any specific queries, please do not hesitate to contact us on 0161 794 7799.
Call Conveyancing Expert