Mortgages.scot

This is an interesting question received earlier this morning, a couple of parts to this one that raises some good points around a rate switch. And changes to circumstances affecting changes you want to make on your mortgage.

Due to COVID I lost my job but got another at 20% less than my previous salary. In a few months, my current mortgage rate ends and I want to move to another fixed rate deal. Will my lender let me do this given my income has changed? They made us jump through all sorts of hoops to get the mortgage nearly 3 years ago and apparently we only scraped through. So I am worried now that we won’t meet their ridiculous income tests now.

Rate Switch

First of all, you should not worry about this. It is true that in the past lenders would attempt to go through the income assessment process again for a rate switch but the mortgage regulator has ensured lenders act fairly in these instances.

Providing all you are asking for is a rate switch then there should be no difficulty at all and no fear about disclosing the fact your income is lower. The lender cannot take your mortgage away as a result of a change in circumstance, neither can they refuse to move you to a better rate. That is providing they do offer them and you are not a mortgage prisoner.

There are however instances where they could insist on a new affordability review but only where there is a material change that may affect your ability to afford the mortgage, for instance:

Asking to borrow more money

A change of product or repayment type increases the cost of the mortgage.

Both of these would mean that as the payments will increase the lender should correctly assess your ability to afford the mortgage.

Even if you approach your lender asking to switch your mortgage to a new property an affordability assessment should not be required if you are not asking to increase the amount.

Lenders may well want to have a call with you to discuss your options to ensure you are choosing the right product for your circumstances at which point income and expenditure questions may be asked but they should only be asking for the purpose of ensuring the right choice of product.

The only caveat would be those lenders which have stopped lending new mortgages or making further advances who are also not offering new rate and products. Although you do not mention the lender’s name I am assuming from your email that is not the case here.

The FCA has issued guidance for those who want to do a rate switch, you can find out more here. If you are making a material change to your mortgage and an assessment is required, check out my affordability assessment guide.

Hope that helps.