Confusing mortgage offer extension rules leave buyers in limbo, say brokers

Confusing mortgage offer extension rules leave buyers in limbo, say brokers

 

Brokers say lenders’ “mixed bag” of support means borrowers who have been on furlough or who have been offered a deal or a loan to value no longer available, face an uncertain future.

To give homebuyers breathing space at the start of the Covid-19 outbreak, an industry-wide agreement to extend mortgage offers for three months for homebuyers who had exchanged contracts was announced by UK Finance and the Building Societies Association in March.

Some lenders went further by extending mortgage offers for six months while others did not insist that contracts must be exchanged in order to be eligible for a renewal.

 

Time is running out

Despite banks’ willingness to draw out offer times, continued delays in the new-build market means time is running out on the first wave of extensions and with no clear message from lenders about what happens next, brokers have been left scratching their heads.

Mobeen Akram, national new homes account director at Mortgage Advice Bureau, said: “The global pandemic has caused further delays to builders’ construction plans, which means in some cases for the buyer their mortgage offers are expiring.

“This is causing additional buyer and adviser concern where the original policy terms may no longer be available from the lender due to them carefully managing their operational capacities, for example, by restricting their lending to 85 per cent loan to value (LTV) or less.

“Advisers should consult with their clients and contact the lender to establish their options as different lenders have different approaches.”

 

In the dark

Brokers say that lenders are not clearly communicating how they will treat borrowers whose deals have been withdrawn and in some cases will not reveal the alternative mortgage deal until a new offer has been issued.

This leaves brokers no time to reassess their clients’ affordability circumstances if the rate has increased. Many banks will also not allow brokers to apply for an extension until two to three weeks before it expires. However, due to the strain on lenders’ resources it is taking longer than that for the renewal to be issued.

Lisa Burns Kent, new build sales director, Meridian Mortgages, said: “I understand that lenders are dealing with unknown risks but we need more clarity. There is a real mixed bag of support depending on clients’ circumstances.”

She added: “I have lots of cases where the product is no longer available. The lender in question says it is rebuilding its range but as yet it does not have alternative deals at the same LTV. This is a big problem.”

Burns-Kent said she had just had a tranche of offers renewed until December, but several developers have pushed back completions to January and February. Beyond the December deadline, she may need to source a new lender.

“If I have to replace a case and it goes from a 2 per cent rate to a 4 per cent rate I have to make sure it is still affordable for the buyers. But I can’t do anything until I know what the bank is prepared to offer.”

 

Material changes

Brokers say applying for an extension when a deal has been withdrawn isn’t the only uncertainty families face. Changes in the borrower’s income structure, evidence of furlough pay, a shift in the credit score or a valuation that has expired can all impact the likelihood of getting a new offer.

Akram said: “There is not a one-size-fits-all solution so it is essential that advisers liaise with the lender and their clients to agree the most suitable solution for each case. Early engagement is critical as lenders continue to experience resource challenges brought about by the pandemic, which is impacting service levels.”

 

What the lenders said

Mortgage Solutions asked the biggest new-build lenders to spell out their policies on the second wave of mortgage offer extensions.

Nationwide said, because of continued new-build delays caused by the pandemic, we’ll continue to consider 90-day offer extension requests for new build properties for both NFI and TMW on offers expiring up to and including 31 December 2020.

For all other applications brokers can continue to apply for 90-day mortgage extensions up to and including 31 October 2020 for those eligible.

Halifax would not disclose the details of its mortgage offer renewal process for loans previously agreed at more than 85 per cent LTV, which are no longer available. Instead it said mortgage advisers should contact the bank to discuss their client’s options based on their individual circumstances. Mortgage Solutions understands that Halifax has recently extended mortgage offers at loan amounts higher than 85 per cent LTV.

Barclays was one of the few banks to offer borrowers who had exchanged contracts an initial six-month extension, and for new-build borrowers who are still being held back by Covid-19 delays, it will offer them a further six months.

NatWest said it will review the clients’ circumstances and if there had been no change it would look to extend the offer at the same loan to value. On new-build properties, offer extensions are available for a three-month period and should be applied for within 30 days of the expiry of the original offer. A maximum of two offer extensions can be applied for resulting in a total offer extension period of six months.

Santander is allowing borrowers who have a mortgage offer for a deal where the LTV is higher than its current maximum loan to value of 85 per cent a two-month extension. This means offers on mortgages applied for prior to 31 March will be valid for a total of eight months from the date it is received. Once the offer expires, borrowers will need to re-apply for a new mortgage deal.

HSBC said it did not have a standard policy and each case requiring a renewal after the first three-month extension would be reviewed individually.

Leeds Building Society will offer the borrower the same mortgage deal when renewing the mortgage offer, even if it is no longer on sale, but said the decision was subject to the mortgage remaining affordable and there being no material change in the property valuation.

Kensington Mortgages will offer a maximum offer extension of six months, on top of the original offer on the condition the borrower’s financial situation has not changed. It will honour the original deal even if it is no longer offered to new applicants.