A third of borrowers affected by Covid are likely to switch to SVR
A third of borrowers who have seen their finances affected by the pandemic said they were likely to switch to their lender’s standard variable rate, research shows.
A January survey of over 1,000 borrowersof the Legal & General Mortgage Club found that 32% of people who were negatively affected financially by Covid-19 said they were likely to switch to their lender’s SVR, rather than a remortgage.
The Mortgage Club has warned that borrowers who have seen their incomes plummet due to the pandemic may soon be paying thousands of pounds more in monthly repayments, as SVRs are typically considerably higher than fixed rates.
Kevin Roberts, Director of the Legal & General Mortgage Club, said: “Even for borrowers who have seen their income decline, there may well be products available that would save them money in the long run compared to SVR. of their lender.
“There are still thousands of great fixed rate deals available, including holiday-friendly mortgages for those who benefit or continue to benefit from the government’s job retention program.”
According to research from the mortgage club, more than half (52%) of borrowers who had seen their incomes drop due to the pandemic feared lenders would take a more in-depth look at their finances, compared to before the coronavirus.
Half feared their decision to defer payments would affect their future mortgage options, and two-thirds (67%) thought it would be more difficult to get a mortgage on leave.
Alex Kemp, Partner at Ideal Mortgage Advisers, said: “We haven’t seen mortgage lenders act with more control over employee income, but we certainly have with independent applicants, because most lenders will now need to see the last three months. ‘corporate bank statements to make sure they are trading well.
“If only [self-employed applicants] have been through the government’s income support program, an application may be refused or other questions may be asked as to why this was taken.
Kemp added: “[Some lenders] will refuse any claim for which there has been a payment holiday on any form of credit in the past 12 months, not just mortgages.
Figures from UK Finance show that there were 130,000 mortgage payment deferrals in place at the end of December, up from a peak of 1.8 million in June.
Meanwhile, Legal & General research also found that those who had seen their income negatively affected by the pandemic were more likely to be unconfident with the remortgage (14%), compared to borrowers whose income had remained stable (3%).
Of those who had no plans to return to their lender’s SVR, more than half (52%) said they were now more likely to stay with their current lender when looking for a new product, 37% doing it because they thought it was the easiest way to close a new deal.
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