Is now the right time for a new mortgage?

Diane Fish is an Independent Financial Adviser with Smith & Pinching, Chartered Financial Planners Picture: Smith & Pinching (Image: Archant)

My wife and I are considering downsizing now that the children have grown up and left. We have a substantial mortgage which we’ve been paying for 15 years and would like to reduce. We’re also aware of the Stamp Duty holiday that’s happening at the moment. Is this a good time to set up a new mortgage? Are there good deals available?

Diane Fish of Smith & Pinching responds:

Generally speaking, there is still a wide range of mortgage products available to people who are in a good position. I suspect from your question that you probably fall into that category, although I would need to find out a lot more about you and your circumstances to say for sure. However, the number of mortgages available is still lower than it was back in March 2020, before the Covid-19 pandemic began.

Lenders will look at the loan-to-value level you need and the affordability of your repayments. It’s always been about the risk that the lender is taking, but this is paramount right now.

Borrowers who are looking for a high loan-to-value ratio – so have deposits of less than 20pc, for example – may find they are limited in the mortgage offers on the market for them. However, if you can come up with a deposit of at least 25pc, you should find there are plenty of alternatives. If you have paid off a significant portion of your existing mortgage and are downsizing, that suggests that you might be able to put down a deposit that makes you attractive to lenders and secure the lower rates.

The process of assessing affordability involves looking at your regular income and expenditure and using these figures to calculate what you can afford to put towards repayments. It’s a key assessment that lenders use to decide the level of mortgage they might offer. However, current uncertainty about the pandemic is having an impact on both the availability of mortgages and the rates on offer. Rates are changing: at the time of writing they have risen slightly after the lows of June and July. The stamp duty holiday has been a factor in this as it has triggered renewed activity in the housing market. Underwriting is taking longer so applicants need to be prepared for this. If lockdown restrictions limiting house moves return, resulting in a housing market slump, then the cost and availability of mortgages may change.I suggest that you talk to an independent mortgage adviser about the different options available to you and the numbers involved.

Your home may be repossessed if you do not keep up payments on your mortgage.There will be a fee for the mortgage advice. The precise amount will depend upon your circumstances, and the type of lending taken. Smith & Pinching’s minimum advice fee is £700. Any opinions expressed in this article do not constitute advice.

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