We continue to live in extraordinary times, with the country in lockdown until at least May 7 (and potentially beyond that point) and the property market in virtual sleep mode thanks to strict social distancing measures and the government’s stay at home guidance.
Despite this, the demand for rental homes has held up and recently regained momentum after an initial (and understandable) coronavirus-based decline. The latest Zoopla Rental Market Report revealed that demand bounced back by 30% over the two weeks to April 14, a trend which is being seen across the UK by region and price band, following an initial 57% decline in demand in the two weeks to March 30.
The research also revealed that there has been no mass withdrawal of rental properties listed to let, down just 3% compared to the start of March.
Still, some landlords will have been badly affected by the coronavirus, particularly those with student lettings or those who tenants currently cannot pay their rent. As a result, one of the steps taken by the government to protect the rental market has been to ask lenders to offer three-month mortgage holidays to borrowers to ease financial pressures where they exist.
Below, we explore closer what buy-to-let (BTL) mortgage holidays are and which lenders are currently offering them.
It was originally unclear if buy-to-let borrowers would be granted the same three-month mortgage holiday as traditional borrowers. However, the government soon announced that residential BTL landlords would also be entitled to the same breathing space as residential homeowners if they have tenants struggling to pay rent due to Covid-19.
The measure was announced to mitigate the possible financial pressures on landlords and tenants during the coronavirus crisis, with rumours that the mortgage holiday payment could be extended further (potentially to six months) if needed.
Nationwide, the UK’s biggest building society, was on the front foot quickly, extending the three-month mortgage repayment holiday to BTL landlords.
“As the UK’s second-largest buy-to-let mortgage provider we feel it is important to extend protection to landlords and their tenants during this uncertain period,” Henry Jordan, director of mortgages at the lender, said at the time. “We have extended mortgage payment holidays to include rental properties so that landlords with tenants who are unable to meet rental payments because of coronavirus are protected as much as possible.”
Elsewhere, Barclays to begin with said that it would not be offering mortgage holidays to BTL borrowers, before rowing back on that decision. The high street lender is now allowing BTL mortgage holders to ask for a payment deferral of up to three months if necessary.
To give a useful overview of which lenders are offering BTL mortgage payment holidays and which aren’t, comparison website Moneyfacts.co.uk recently approached some of the biggest lenders in this market to see where they stood on this key question.
Alongside Barclays and Nationwide (the latter through its The Mortgage Works arm), Coventry Building Society, HSBC, Paragon Bank, NatWest/Royal Bank of Scotland, Santander Bank and Virgin Money are all offering mortgage payment holidays for BTL landlords.
With all of the above, landlords must apply online and all the lenders offer online self-certification forms to allow for the application of a mortgage payment holiday.
As of March 31, when Moneyfacts contacted the lenders, it was unclear if Lloyds Banking Group, Precise Mortgages and OneSavings Bank (Kent Reliance) were offering mortgage payment holidays.
If you are unsure or unclear about your lender’s position, it’s a good idea to get in touch with them as soon as possible to find out where you stand.
You will be given up to three months where you are not obliged to make a repayment to your lender if you decide to make use of your lender’s mortgage holiday scheme.
It’s important to note that you are only eligible to apply if your mortgage payments are up to date and your tenants are unable to pay rent due to financial difficulties occurring because of coronavirus. Importantly, lenders have reassured borrowers that applying for a mortgage payment holiday will not affect their credit rating.
Additionally, it’s vital to bear in mind that this is not free cash, or a way out of payment, as your monthly mortgage repayment will increase to add on the missed months and additional interest accrued once the holiday is over. Alternatively, you could look to extend your mortgage by three months and pay it back that way. Speak to your lender to find out your options.
In effect, the holiday is a delay or deferral to ensure landlords aren’t financially hindered during the Covid-19 pandemic if their tenants can’t pay rent as normal. Equally, it’s there to assist landlords whose homes are currently empty because, for example, they exist in the student accommodation sector.
While most have an interest-only BTL mortgage – allowing for monthly repayments to be much less of an issue – this isn’t universally the case. Those making regular monthly repayments should, in most cases, be able to receive a mortgage payment holiday if this is required.
As you’d expect, it varies from lender to lender, but Santander is asking its borrowers to allow 10 working days for applications to be processed. NatWest, meanwhile, has said that applications received where the payment due is less than two weeks away may not be processed in time. However, if this is the case, the bank insists it will let landlords known within five days of their application to confirm the status of their account. HSBC, which recently put a temporary stop on accepting BTL mortgage applications during the coronavirus crisis, says on its website that it will reply to mortgage holiday applications within seven days, while Coventry Building Society is prioritising applications based on the earliest payment date.
Those landlords who hold a BTL mortgage with The Mortgage Works (part of Nationwide) should make their application through The Mortgage Works website. The building society says it will respond within 10 working days, but adds that it may need extra time due to the high number of applications.
We understand that this is a difficult time for everyone, but communities and industries are coming together to help each other out, while the governments across the UK are making dramatic interventions where this is warranted.
Here at Centrick, our team are currently following government guidelines and working remotely, but we are still offering virtual viewings and valuations. As a result, if you’d like an idea of what your home could be worth once the market resumes, get in touch with our team to discuss your requirements and how we can appraise your property via Facetime or Zoom. You can also get an instant valuation with our handy tool here.
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