The Mortgage Market

The Mortgage Market – Your Guide To 2021

We are going to take a look at the current mortgage market, including stamp duty, house prices, and an overview of what 2021 might have in store for us.

How do you feel 2021 has started?

It’s such a breath of fresh air that we’re now into 2021, but this (Covid19) isn’t going away any time soon. I think the biggest saving grace we’ve got at the moment is the vaccines that they’ve come out with. That’s encouraging and it’s dampened the effects of another further lockdown that we’re currently in.

Getting the vaccines and rolling those out to as many people as possible over the shortest period, is the big challenge that the UK has got on at the moment.

The mortgage market and the housing market so far, seem very buoyant, which is great, isn’t it?

Statistics show that on average, there’s been a 7.3% market increase for the year 2020, which you could have never predicted given everything that happened. However, there have been a lot of things stimulating that and in particular, the stamp duty being one of that stimulus.

What are your thoughts on Stamp Duty?

It has kept that side of the economy moving, not only moving but growing. That is why we’ve seen a 7.3% house price increase over 2020, despite the challenges. There could, however,  be real concerns on the way in terms of setting a deadline for it. That’s created a lot of issues.

There were warnings at the back of 2020, about the deadline being literally around the corner. “It’s approaching fast, and if you don’t get your sale agreed, you’re not going to complete in time to hit the March 31st deadline.” Again, it’s created a cliff edge that everybody’s talking about at the moment. That’s the bit that should have been done differently.

Perhaps they should have just launched it and said, “We’ll review how long we go this far.” It’s creating a few problems.

It’s inevitable, given everything else that the lenders were dealing with last year. With payment holidays etc, and now this stimulus in the marketplace that is seeing an increase in mortgage applications.

There’s been some criticism around the stamp duty move, in terms of the house price increase at 7.3% as a false increase. To a large extent, it’s down to stamp duty.

There are lots of people standing up now and saying that this needs extending, but a deadline is a deadline. The estate agents also need to realise,  typically properties on the market worth a value of two hundred pounds, have been that price for a long time. Yet four months ago, suddenly they were cropping up on the market for sale at two hundred and fifteen thousand.

People are having to pay over market value for it, up and above what a valuer has valued the house at. Therefore, the agent needs to work for that commission. They need to manage their client’s expectations and make sure that there are funds just in case that does run off that deadline. If that deadline is still in place as of March 31st.

What if I’m on furlough right now? What is the situation in regards to any mortgage?

It’s been hard for mortgage brokers throughout 2020 with the ever-changing lender’s criteria, and then the furlough scheme too. A lot of lenders said, “ I don’t understand this. What is it?” Those on furlough stopped lending to them, then it started to relax a bit,  then it changed to 80% of earnings and now we’re back again, and seeing a continuation of this.

There are plenty of deals available, but when you start looking at the lender’s criteria for each of those deals, the majority of them are not accepting new applications for anyone who’s currently on furlough.

So, it’s standard across most lenders right now than in terms of their stance due to the uncertainty?

Yes, absolutely. It is unfair, but it’s understandable why they’re doing it and we are talking about that higher loan to value bracket here. There’s one lender that stands out particularly at the moment and that seems to be the most lenient and not to mention any names, but that’s Barclays.

Some good news, high loan to value is back then?

Hearing that lenders are now starting to talk about getting back to that high loan to value, lending is going to be good news, and certainly for First Time Buyers. As we sit here now, we’ve seen an increase in the available products based on the 90% loan to value category.

I think if they’re taking that additional risk, that’s the reason behind why they are also trying to reduce that risk by not accepting, for example, your clients that are on furlough. The Government is also talking a lot about the 95% and providing some schemes and support. It’s going to come back this year, most certainly.

Moving on to house prices. What does it look like in terms of 2021 compared to 2020 following the 7.3% increase?

Given everything that’s going on out there in the world at the moment, certainly, people are taking a bit of a hit in the salaries and if you fail, it’s 80% of your salary. Therefore, if you’re seeing house prices increase as well, they’re becoming less and less affordable. It’s a monster that keeps getting fed, and it’s trying to manage people through at the moment. It’s quite tricky.

You don’t know when you’re going to get that next curveball and it doesn’t help with all the fake news out there. There was a news article published a few hours ago, suggesting they see a continuation of house prices over 2021, that was backed up, but that will be conditional if this, that, and the other happened. Stamp duty came into that too.

It was also discussed the possibility of tax changes that are not going to be ‘attractive’ to the likes of landlords. The purpose of that, again, is to look at almost shouldering out landlords. Therefore,  that provides additional housing for all these buyers who are currently finding a shortage of properties to buy.

If there’s a change in tax legislation that could have another unexpected effect on the market. Therefore, we’re not making any of these predictions. We’re having open discussions, and playing devil’s advocate.

What knock-on effect does that have within the housing market if there are fewer properties for rent, and the housing market in general, how does that affect the whole situation?

I think a high proportion of most people that are renting, don’t want to be renting. They’re almost forced to do this. I think that’s part of the initiative from The government’s side. They want to try and shoulder out these landlords to provide some additional housing for these buyers, currently being forced to rent.

What’s changed with the Help to Buy scheme?

The help to buy scheme was introduced some years ago, but they’ve now changed it. In a nutshell, this is to help first-time buyers buy a new property with a minimal deposit. In conjunction with that, you’re also taking a government loan, but you don’t have to pay any of that loan back for five years.

It helped a lot of first-time buyers out and it meant a minimal deposit. The new help to buy scheme now has got a few changes incorporated into it. The biggest one is, there is a maximum ceiling on the purchase price of the property that you can have on the help-to-buy scheme.

These vary massively. For example, if you buy in the northeast, the maximum property purchase price is one hundred and eighty-six thousand, one hundred. If you’re looking at Yorkshire and Humber, the maximum purchase price is two hundred and twenty-eight thousand, one hundred. From experience first-time buyers over the last year were buying new build properties way above the current to 28 for Yorkshire and Humber, that’s currently the maximum.

It’s great that we’ve still got the help to buy options, but again, we need to be mindful of the changes that are coming in.

A lot of the people who were buying on the help-to-buy scheme, on the previous scheme, the builders are in turmoil currently because they’ve got this deadline looming for them as well. We’ve got to complete these bills in time to hit the deadline to qualify for the previous terms.

There’s a massive panic in that area at the moment.

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