Buy-to-let mortgage holidays – what do landlords need to know?
Fri 24 Apr 2020
In the current extraordinary situation – which means the UK in lockdown for the foreseeable future and the UK Prime Minister, Boris Johnson, currently in intensive care battling coronavirus – significant steps have been taken by both the UK government and the devolved Scottish Government to protect the economy, jobs and the rental market.
One of these steps has been to ask lenders to offer three-month mortgage holidays to borrowers to ease financial pressures. Initially, this was mostly aimed at traditional borrowers, but in recent weeks those with a buy-to-let (BTL) mortgage have started to be catered for, too.
Here, we take a closer look at buy-to-let mortgage holidays and which lenders are currently offering them.
What is being offered?
After it initially being unclear if buy-to-let borrowers would be granted the same three-month mortgage holiday as traditional borrowers, the UK government announced that residential BTL landlords would be entitled to the same breathing space as residential homeowners if they have tenants struggling to pay rent due to Covid-19.
The announcement was made in an effort to ease the financial pressure on landlords and tenants during the Covid-19 outbreak, with speculation that the mortgage holiday payment could be extended further (perhaps to six months) if required.
Nationwide was quick off the mark in extending the three-month mortgage repayment holiday to BTL landlords. Henry Jordan, director of mortgages at Nationwide, said: “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. 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.”
Barclays, meanwhile, initially stated that it would not be offering mortgage holidays to BTL borrowers, but recently went back on this decision and is now permitting BTL mortgage holders to request a payment deferral of up to three months if required.
Comparison website Moneyfacts.co.uk recently approached some of the biggest lenders in the BTL market and asked if they would be offering mortgage holidays.
As well as Barclays and Nationwide (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. In all cases, 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 approached 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, it’s recommended you get in touch with your lender to find out more.
How does a BTL payment holiday actually work?
If you utilise your lender’s mortgage holiday scheme, you will be afforded up to three months where you do not need to make a payment to your lender.
You will be eligible to apply if your mortgage payments are up to date and your tenants cannot pay due to the financial difficulties arising because of coronavirus. Lenders have reassured borrowers that applying for a mortgage payment holiday will not affect credit ratings.
Once the payment holiday has finished, the monthly mortgage payment will increase to repay the missed months and additional interest that has accrued. So it’s important to bear in mind that this is not free cash, or a way out of payment, but just a delay or deferral to ensure landlords aren’t financially hindered during the Covid-19 outbreak if their tenants can’t pay rent as normal, or if homes are empty because, for example, they exist in the student accommodation sector.
Most landlords, of course, have an interest-only mortgage – meaning monthly repayments aren’t such an issue as only interest on a mortgage is repaid each month – but this isn’t the case for all landlords. And those making regular monthly repayments should, in most cases, be able to get a mortgage payment holiday if this is required.
How long is it taking to process BTL mortgage payment holidays?
It varies from lender to lender, but Santander is asking borrowers to allow 10 working days to process applications. Meanwhile, NatWest said that applications received where the payment due is less than 14 days away may not be processed in time. If this is the case, the bank says it will let landlords known within five days of their application to confirm the status of their account.
Coventry Building Society is prioritising applications based on the earliest payment date, while HSBC says on its website that it will respond to mortgage holiday applications within a week.
For those landlords who have a BTL mortgage with The Mortgage Works (part of Nationwide Building Society), you should make your application through The Mortgage Works website, with the building society saying it will respond within 10 working days. However, it says it may need extra time due to the high number of applications.
This is an easy time for no-one, but communities and industries are coming together to support each other, and governments across the UK are making dramatic interventions where necessary.
Here at Letting Solutions, West Lothian’s first dedicated lettings agency, we are still continuing to operate, albeit strictly in line with all the required rules on social distancing and self-isolation as a result of the pandemic.
Members of our team are working remotely covering all aspects of the business, with our hours of business unchanged (Monday to Friday 9.15am-5pm, with the exception of Wednesdays, when for training purposes we open from 11am-5pm.
You can find out more about how we are still open for business here.
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And, remember, everyone please take care.