July and August saw a rush of pent up demand from buyers, and solicitors are currently working through a huge workload of property purchases. We found that many excited first time buyers were struggling when it came to getting a mortgage in principle accepted on a property. We saw surveyors down valuing property due to a potential property crash, and changes to the financial requirements of lenders making criteria tougher for buyers to meet.
Currently there are few providers offering mortgages with a 10% deposit and many have restrictions on where the deposit funds can come from to secure the lending. The recent mad dash for mortgages has given the providers a large pool of people to choose who to lend to and they are increasingly restrictive with limited products available as they are being cautious about what is to come.
Boris announced that 5% deposit mortgages will return to the market for first time buyers. We are not sure when or how this will be implemented but it will make some buyers wait to see what will be available to them.
If first time buyers wait how will that affect the property market? I think many properties on the market under £250,000 will continue to see a reduction in interest, from the busy summer period, over the next few months. This is also the price bracket that many investors are looking at and if there are less first time buyers looking there may be an opportunity for investors to pick up some good property deals. If you are an investor should you be buying now while FTB’s pause? Avoiding a rush to buy once it becomes clear what the government offer will be.
If you are a First time buyer what should you be doing now? Prepare for future. If the government do introduce FTB 5% mortgages there will be demand for these and we can learn about the current lenders criteria to help FTB plan ahead.
Sometimes searching for a mortgage online is not always the best option. Speaking to an advisor and being open with your financial history can help prevent future disappointment. Understanding how a lender will view your payment history and deposit will ensure you get access to the best deal for you and a deal that is more likely to be accepted.
I spoke to Dani Swann who is a professional Mortgage Broker to understand how she was finding the current lending market.
She said “Earlier lockdown originally meant that property valuations were non-essential travel and therefore lenders were unable to make assessments to lend. Fears for market stability saw restrictions in criteria, furloughed staff and other lenders withdrawing completely also saw that those still willing to lend were experiencing significant processing backlogs. The housing market was announced ‘open for business’ by the Government 13th May, allowing buyers to move, estate agents to reopen and valuers to visit homes. We saw green shoots as lenders also found innovative ways to value properties remotely, and criteria restrictions began to lift.”
“Inflows increased further once the Government announced stamp duty cuts to stimulate the economy 8th July. Lenders have tentatively increased their product offering over the summer by allowing smaller deposits, sometimes offering rates to advisers for a 48hr window only. Subsequently we are seeing the vast majority of lenders stretched to 4 weeks for initial application assessment. August, typically a quiet month due to school holidays, saw a national record of mortgage application submissions for 13 years. Predictions are that levels of business will continue into Q1 2021 whilst the stamp duty reduction plays out, and homeowners demand more space whilst working from home during lockdown uncertainty.”
“Furlough income, payment holidays, and low/adverse credit history, such as defaults and CCJs, have been some of the most widely researched criteria for this period, as advisers try to find a home for all enquiries presented. Family-assist mortgages have also played their part in helping first time buyers with little or deposit to make their step on to the property ladder. Typically, these involve family savings as collateral or an equity charge over the family member’s own home.”
“Patience is the new normal, for now, as transactions are taking longer than usual from research to lender to solicitor. You should allow more time for any mortgage to complete in the current climate.”
To speak to Dani about the mortgage market, if you are looking for a new mortgage or to re mortgage and take advantage of the current low interest rates, email her Dani.Swann@mab.org.uk
If you are a first time buyer or an investor looking to purchase a property please feel free to give me a call to discuss what we are experiencing at the moment and how best to navigate the housing market in 2020. Charlotte Baker 01664 569700 charlotte.baker@belvoir.co.uk
