How Covid-19 could affect your mortgage
The Bank of England's cut in interest rates is good news for many mortgage holders.


What’s happening to interest rates?
Last week’s announcement that the Bank of England was slashing the base rate from 0.75% to 0.25% is good news for many mortgage holders, writes Ruth Jackson-Kirby. Several big banks including Santander, Lloyds and Halifax swiftly moved to cut their own rates to reflect the drop. Homeowners on a tracker mortgage or their lender’s standard variable rate should see a fall in their repayments from April.
Should I remortgage?
Nonetheless, the drop in the base rate doesn’t mean now is the time to remortgage. Some top lenders have actually hiked rates on their fixed-term mortgages, as Adam Williams points out in The Daily Telegraph. HSBC has increased the rate on its fixed-rate mortgages by as much as 0.1%; Accord Mortgages and Leeds Building Society have also hiked the price of their fixed deals. “Rates have been so low for so long that lenders have seen this as a way of boosting margins,” Colin Payne of financial planner Chapelgate told The Daily Telegraph.
What if I can’t make my repayments?
While the interest-rate cut may help some mortgage borrowers, many more will be under financial pressure as a result of coronavirus. As more and more people self-isolate they may only get statutory sick pay or go unpaid. This could leave many people worrying about how they will meet their mortgage repayments. The government has now announced that all homeowners can claim a three-month repayment holiday from their mortgages if they are unable to pay owing to the coronavirus.
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“It has not been clarified how eligibility will be decided,” says Adam Williams in The Daily Telegraph. “However, those banks which have already offered payment holidays allowed both those who have the virus, and those who are healthy but have suffered a loss in income, to claim.” A payment holiday means you can take a break from paying part or all of your monthly total. While this is known as a payment holiday, it isn’t all sunshine. Interest will still accrue so “homeowners will see monthly bills rise slightly when they resume payments”, says Anna Mikhailova in The Daily Telegraph.
What is forbearance?
One term cropping up a lot is forbearance. When it comes to your mortgage, this means an agreement between you and your lender to delay mortgage payments because of financial hardship. It could entail reducing or delaying your payment, or increasing the term of your mortgage. If you are worried about being able to make your mortgage repayments, speak to your lender immediately.
Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings and credit cards to pensions, property and pet insurance.
Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.
Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping among many other titles both online and offline.
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