We’ve had lots of landlords asking us about the government’s COVID-19 mortgage payment holiday scheme since it was announced back in March. However, only a minority who’ve contacted us are facing genuine financial hardship due to the pandemic and, as Managing Director Steve Olejnik explains, lenders are beginning to react to the number of landlords crying wolf and taking advantage of the current situation.
To ensure that landlords can cope financially with temporary tenant void periods, all buy to let mortgages include ‘stress tests’ in the affordability calculations. This is designed to mitigate the risk of landlords defaulting on their buy to let mortgages; protecting both their own credit score and the lender.
While the Coronavirus may be causing tenants financial stress, the scheme is for landlords who themselves are unable to pay. Many lenders are now asking for proof that you, as a landlord, are unable to make your mortgage payments due to the ramifications of lockdown and are not necessarily satisfied with “my tenants can’t pay their rent right now”.
Worryingly, we’re having conversations with some lenders who are now concerned that the number of landlords seemingly in need of mortgage payment holidays means that the stress test levels have not been set high enough. Some are now considering increasing their thresholds to better cope with void periods to ensure that landlords are still able to afford their mortgage payments. This could have a huge knock-on effect on the affordability of mortgages across the market.
For those in genuine need, the mortgage payment holiday scheme is a lifeline during these difficult times; however, this doesn’t mean that there won’t be implications for their future buy to let mortgage applications. We have already seen some cases where lenders have cancelled landlord’s active mortgage applications after they’ve asked for a mortgage payment holiday on an existing property. Furthermore, a number of lenders have warned us that applying for mortgage payment holiday now could have a negative effect on future applications. We know that many landlords are already making preparations to take advantage of the predicted short-term fall in property prices and expand their portfolio once lockdown is lifted. However, it’s possible that taking a mortgage payment holiday now could have a severely negative impact on your future buy to let mortgage applications.
We would urge any landlords considering a mortgage payment holiday to think long and hard about whether they really need it and seek advice as to whether it’s their only option. You can read our useful guide on the other options to consider before taking a mortgage payment holiday on your buy to let properties.
If you’d like advice about what your most suitable options might be at this time, please do not hesitate to contact us. Things continue to change very quickly, and our consultants are keeping up to date with how the lenders are reacting. You can call us on 0345 345 6788 or email firstname.lastname@example.org.