How Covid-19 could affect your mortgage

The Bank of England's cut in interest rates is good news for many mortgage holders.

You may fall behind on your mortgage, but your home won’t be repossessed © Getty

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.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

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.

“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.

Advertisement
Advertisement - Article continues below

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. 

Advertisement

Recommended

Visit/personal-finance/mortgages/601045/coronavirus-what-it-means-for-your-mortgage-or-your-rent
Mortgages

Coronavirus: what it means for your mortgage or your rent

Ruth Jackson-Kirby looks at all the key questions for owners, renters and landlords affected by the coronavirus crisis.
29 Mar 2020
Visit/personal-finance/mortgages/600892/overpay-your-mortgage-to-cut-thousands-off-the-cost-of-your-home
Mortgages

Overpay your mortgage to cut thousands off the cost of your home

If you overpay your mortgage every month you could knock years off your repayment period and save thousands on the cost of your home.
3 Mar 2020
Visit/personal-finance/600673/act-now-to-beat-the-spring-remortgage-rush
Personal finance

Act now to beat the spring remortgage rush

Many homeowners will see their bills jump in April as competitive mortgage deals expire. Find a new one now.
28 Jan 2020
Visit/518837/should-you-invest-in-a-holiday-let
Property

Should you invest in a holiday let?

There is money to be made in the rapidly expanding holiday let market. But do your sums carefully before you buy.
4 Dec 2019

Most Popular

Visit/investments/property/601081/three-things-matter-for-the-uk-housing-market-now-and
Property

Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020
Visit/investments/property/601065/what-does-the-coronavirus-crisis-mean-for-uk-house-prices
Property

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020
Visit/investments/stockmarkets/601101/has-the-stockmarket-hit-rock-bottom-yet
Stockmarkets

Has the stockmarket hit rock bottom yet?

The world's stockmarkets continue on their wild and disorientating rollercoaster ride. Investors are still gripped by fear. So, asks John Stepek, have…
2 Apr 2020
Visit/investments/commodities/energy/oil/601107/oil-shoots-higher-have-we-seen-the-bottom-for-the-big-oil
Oil

Oil shoots higher – have we seen the bottom for the big oil companies?

Just a few days ago everyone was worried about negative oil prices. Now, the market has turned upwards. John Stepek explains what’s behind the rise an…
3 Apr 2020