With the Summer holidays now in full swing, it is normally a time where the property market experiences a lull in proceedings but as we have come to find out, 2020 is no ordinary year. Many of us have been in a reflective mood during these odd times and have used the time to plan the next steps. Previously, such deliberations might have been several years in the making yet have been crystallised in a matter of months. Whether it is the need for more space, making the move to the countryside from the city or indeed acquiring a second home either here in the UK or overseas, we have seen evidence of all of these decisions being reached over the last few months. Indeed August often precedes the purchasing of a holiday home or a weekend retreat and we have already been involved in a number of such conversations with clients.
The Lending Market
The lending market remains extremely attractive, with rates at extremely low levels. Rates are starting at a little over 1% and we are beginning to see lenders’ risk appetite sharpen as the higher loan to value (LTV) offers to begin to drift back, albeit not to the pre-covid levels yet. The lenders themselves are coping stoically with staff working remotely. It has been tough for many industries but is certainly less than conducive for mortgage underwriters, who will often make decisions after a quick consultation with a colleague who sits across the desk. These interactions are now much less frequent and more time consuming than previously which leads to longer turnaround times.
Valuations continue to be a challenge as fewer valuers are available and those that are working, are unable to carry out the volume of valuations that would have been the norm previously. There has of course been a shift towards automated valuations but these are not always viable if the required data is not available, therefore timescales are still elongated compared to times gone by, albeit they are still well within acceptable limits.
We are often asked to help the children of clients and arrange mortgages for the purchase of a first home. This often requires the help of parents to supply the deposit by way of a gift but we have seen marked criteria change from a major lender who is now insisting that the applicant demonstrates that they have saved at least 75% of their deposit from earnings, thus ruling out a full gifted deposit. For those young people looking to buy in London, saving for a deposit from earnings is going to prove completely unrealistic. However, a significant caveat remains that inherited money is still deemed suitable and constitutes the client’s own savings. It seems an unhelpful approach but only goes to illustrate that lender caution remains higher, especially for higher LTVs.
Stamp Duty Changes
In other news, the Chancellor of the Exchequer has introduced a stamp duty holiday which will run through to 31st March 2021. He has temporarily abolished the band up to £500,000 and will benefit all home buyers. This appears to have supported demand as the turnover in transactions has risen sharply as people have brought forward their plans due to the combination of reduced stamp duty and how lockdown has affected them and their families. If you would like to investigate the effect of the stamp duty cut please visit https://www.henrydannell.co.uk/all-mortgages/calculators/.
As ever, the Henry Dannell team are here to advise and help clients navigate the mortgage market. Should you need our help, please do not hesitate to get in touch.
Please note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.