by admin | Jul 31, 2020 | Mortgage News
Prior to the lockdown, average house prices were predicted to rise by up to15% over the next five years. With COVID19 having sent the world into a tailspin, that might now be overly optimistic. It does, however, seem reasonable to expect the housing market to hold on and possibly even see growth. This is because the same positive factors still largely apply.
The “Brexit bounce”.
Houses are long-term purchases. There are lots of reasons for this, but most of them revolve around the fact that buying one usually involves a number of up-front costs and, it has to be said, corresponding administrative work.
This means that you generally want to be sure that you can stay in one for at least five years before you even contemplate a purchase, especially if you’re a first-time buyer and hence potentially qualify for special help.
Additionally, the fact that most buyers need mortgages means that they have to think carefully about their ability to service a mortgage over at least five years (which will be checked by a lender in any case).
For all of these reasons (and more), the extended delay over implementing the result of the Brexit referendum has really acted as a strong brake on the housing market. Hopefully, the fact that Brexit is now finally happening (regardless of your views on it), will allow both potential buyers and potential sellers to make plans in which they can have some degree of confidence.
Admittedly, this does depend on finding a post-COVID19 “new normal” but the signs are that this appears to be happening already. The lockdown is easing, businesses are reopening and while the economic situation remains challenging, there at least appears to be light at the end of the tunnel.
Significant investment in transport infrastructure
HS2 is, at the very least, delayed, and it will be interesting to see whether COVID19 will force the government to cancel it (or give them a face-saving reason to cancel it). Even if HS2 is cancelled, there is still very likely to be a focus on continuing to develop the infrastructure in the north of England. This will be partly for economic reasons (to encourage growth in the area) and partly for political ones (to hold on to electoral gains).
On that note, the expansion of Manchester Airport is already going ahead. In principle, the third runway at Heathrow should also go ahead, but there is always the possibility that this will be cancelled, possibly to placate those who are opposed to HS2 on cost and/or environmental grounds. Crossrail, however, is already underway.
Since none of these developments is complete (in fact neither HS2 nor the third runway at Heathrow are actually under construction yet), it’s impossible to say what specific benefits they will bring. It is, however, fair to say that improvements to infrastructure, especially transport infrastructure often lead to increased house prices along the route, particularly near to stops.
Economic stability (possibly growth)
The fact that the “Northern Irish issue” appears to have been resolved (or, at the very least, that there is a path to resolution), should hopefully make it much easier for there to be a smooth transition out of the EU.
It is probably fair to say that the EU’s desire to encourage members to remain in the block rather than going it alone will have to be balanced with a pragmatic approach to keeping trade flowing between the UK and the single market. It’s definitely fair to say that the UK has long traded on a global basis and hence should be able to continue to do so successfully. If this is the case and there is, at least, economic stability, then this is likely to have a positive impact on the housing market.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Jul 24, 2020 | Mortgage News
Non-essential businesses are now starting to reopen, albeit with safety measures in place to protect against COVID19. This includes the UK’s estate agents who can now take prospective buyers and renters to view potential new homes. Of course, this supposes that there is a supply of buyers and renters and a pool of new homes for them to see. It also supposes that buyers who need a mortgage will be able to get one.
The issue of demand
Given that everyone needs somewhere to live and not everyone can live with their parents (or in accommodation provided by their work), there is always some level of demand in the housing market. The real question is whether the demand will be for property to buy or property to rent.
When you buy a home, assume you either pay cash or use a repayment mortgage, you build up equity in an asset. This can be a powerful argument in favour of buying. The problem, however, is that if you need a mortgage, then you have to be confident that you can make the repayments or else you could risk losing your home. In fact, you could risk losing your home and still owing your lender money. You also risk having your credit record damaged and having to deal with the consequences of that.
When you rent, by contrast, you do not build up any equity in your home and there are consequences for missed payments, including, potentially damage to your credit record. On the other hand, you are only committed to a tenancy for the length of a lock-in period and even then it may be possible to negotiate an early release with your landlord. This can offer people much more room to manoeuvre if their circumstances change, financially or in any other way.
The issue of supply
On the home-sales side, supply depends on people being either forced or willing and able to leave their current homes. At present, it’s a very open question how much either reason will apply in a post-COVID19 market and the answer will probably depend largely on how well the UK weathers the post-lockdown financial reckoning (and Brexit).
If it can, at least, escape recession and keep the economy ticking over, then forced sales should be minimized and hopefully people will have the confidence to move home in line with their lifestyle changes (e.g. arrival/departure of children) and preferences. If, however, the UK enters a recession or even stagnates, then the number of forced sales may increase and potential home-sellers may choose, or be forced, to stay where they are, rather than risk a change.
The home-rentals side is slightly different as buy-to-let property is bought specifically as an investment, not a home. This means that the level of supply is likely to be determined by how well property compares to other investments, such as the stock market. There is, however, the potential for properties intended for short-term letting to be brought back into residential use (for example if travel restrictions make them uneconomical). There is also the possibility that there will be an increase in the number of people letting out rooms.
The mortgage market
In principle, the mortgage market is still operating to the rules imposed by the Mortgage Market Review. It remains to be seen, however, whether or not these rules will function in a post-COVID19 environment and, if not, what the government will do about it. Again, much is likely to depend on how well the UK performs economically over the foreseeable future.
If the economy performs at least reasonably well, then the government may feel that it can leave the housing market, and by extension the mortgage market, to get on with its own business. If, however, it does not, then some form of intervention may be necessary.
Your property may be repossessed if you do not keep up repayments on your mortgage.
The FCA does not regulate some forms of Buy to let mortgages.
by admin | Jul 17, 2020 | Investment, Mortgage News
The plight of first-time buyers has been a matter of concern for some time now. With COVID19 restrictions ongoing and Brexit around the corner, it looks like life could be about to get even tougher for (potential) first-time buyers. Here are some of the challenges they may face – and what might be done to help them.
Raising a deposit
Back in 2017, Lifetime ISAs were introduced to help people save either for their first home or for a pension (or both). In response to the impact of the Coronavirus pandemic, the government changed the rules on Lifetime ISAs to allow borrowers to withdraw funds without an active penalty. In other words, borrowers lost the government bonus but did not have to pay the 5% withdrawal fee.
Once the UK has established a post-COVID19 “new normal” (and possibly after Brexit if that is later), it might be feasible to reassess the Lifetime ISA situation and see if there is any way to use it to help undo the damage of the pandemic (and, if relevant, Brexit).
At the very least, the government could look at ways to make it possible for people to “get back where they were”, even if they can’t afford to replace the money they withdrew during this financial year. It may even be possible for the government to increase the savings limits (and corresponding bonus) and/or the length of time over which first-time buyers can save.
Satisfying the affordability criteria
The Mortgage Market Review obligated lenders to stop making lending decisions purely on headline data such as income and, instead, to look in more detail at a potential borrower’s ability to afford the loan in their personal circumstances. Making this work in practice requires being able to make reasonable predictions about what the future is likely to hold for the person in question. This could be extremely challenging in a post-COVID19/peri-Brexit environment.
On the one hand, nobody wants to see a return of the behaviours which led to 2008. On the other hand, nobody wants to see buyers, especially first-time buyers, frozen out of the market due to lenders being unable to offer them any flexibility in case they wind up on the wrong side of the FCA. Again, this looks like an area where parliament could potentially assist.
The government has already extended the Help to Buy Equity Loan scheme albeit only for first-time buyers. This could possibly be expanded further, albeit with appropriate caution. For example, the rules could be adjusted to allow for the purchase of existing properties. This could open up some interesting opportunities for first-time buyers such as the option to take on former investment properties, perhaps even the homes they are currently renting, or even to buy properties in need of refurbishment.
Dealing with the fear of a market downturn
Buyers, especially first-time buyers, may be wary of buying into the property market in the near future for fear that the property market will be hit by a slump or, even worse, by a crash. While these fears are understandable, they are also a sign that buyers need to be educated about the realities of property purchase.
In particular, property professionals need to ensure that buyers are clear about the fact that property should be seen as a long-term investment purchase rather than a short-term impulse buy. They should expect periodic fluctuations in the market, including occasional, sharp, downturns, and be prepared to ride them out.
This may involve working with the broader financial services industry and maybe even the government to ensure that first-time buyers have the necessary financial education to understand the financial practicalities of home-ownership.
Your property may be repossessed if you do not keep up repayments on your mortgage.
For Investments we act as introducers only.
The FCA does not regulate some forms of Buy to let Mortgages.
by admin | Jul 10, 2020 | Mortgage News
When the Coronavirus hit, the housing market was forcibly brought to a halt. Now that restrictions are being lifted, it is starting to come back to life. This raises the question of whether it’s going to bounce back or whether there is going to be a housing market slump. This week’s Stamp Duty announcement will certainly play a large part in how the market develops.
Where now for the UK’s economy
Unless you can afford to pay cash for a property, your ability to buy one will depend on your ability to get a mortgage. If you want a mortgage, you will need to show your lender how you intend to repay it.
Unless you have a reliable income from sources other than work, this effectively means that your lender has to be happy that you have a decent chance of earning a living over the mortgage term. This starts with you having a decent chance of earning a living over the immediate future.
In short, therefore, the health of the UK’s housing market is likely to be closely tied to the overall health of the UK’s economy.
The economic impact of COVID19
On the one hand, it’s hard to describe the economic havoc wrought by COVID19. According to the Bank of England, the UK came close to insolvency. Some of the businesses which closed their doors to lockdown will never reopen them again. Admittedly, some of these closures might have happened regardless of the lockdown, but some of them might have survived.
It’s anyone’s guess how many more businesses will close and whether or not they would have survived if it hadn’t been for lockdown. Even if businesses do survive, they may be forced to cut back on their workforce. This will not necessarily mean redundancies. It could also mean steps such as cutting back on hiring, eliminating overtime or reducing hours for zero-hours workers or increasing the workload on in-house staff instead of hiring freelancers.
On the other hand, COVID19 has seen stories not just of businesses adapting to survive, but even succeeding in adverse circumstances. For example, according to research from Tamebay, UK SMEs actually increased their exports during the lockdown.
Non-essential businesses are starting to reopen and, where necessary, they are making adaptations to their business to ensure that staff and customers are protected from COVID19. Hopefully, these measures will not only prevent a resurgence of the virus but also serve as a form of protection against future pandemics.
Hopefully, therefore, the worst is now over and the UK can focus on moving down the path to economic recovery. If this is the case, then it is good news for the housing market.
The economic impact of Brexit
Only time will tell what impact Brexit will have on the UK’s economy. In this instance, however, businesses (and the public) have been given plenty of notice regarding the fact that it is going to happen (arguably four years worth of notice).
They also have at least some idea of the worst-case scenario, i.e. the UK leaves without a deal. This means that they have at least some opportunity to prepare for it, even if they are not happy about it. Hopefully, this means that any “transitional bumps” will be minor and short-term, at least in the general scale of the UK’s economy.
If this is the case, then the final arrival of Brexit may actually be a relief for the property market. Right now, people cannot know where Brexit will leave them. This means that they may not be confident committing to a major purchase, such as a new home. Getting clarity on what Brexit actually means in practice may put at least some people in a better position to make informed decisions on whether or not they are in a position to buy in the near future.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Jul 3, 2020 | Mortgage News
The UK has been in some form of lockdown since 23rd March. It’s impossible to know for sure what impact that had on the spread of the Coronavirus. It is, however, very clear that it has had a significant impact on people’s finances. The challenge now is to transition back into “business as usual” while still supporting those who need a bit of extra help.
The economic impact of COVID19 (so far)
Over 10 million people have received financial assistance through the Coronavirus Job Retention Scheme (about 8 million) or Self-Employed Income Support Scheme. The CJRS was due to close at the end of July but has now been extended until the end of October. That said, the nature of the scheme is due to change slightly.
At present, the government is paying 80% of salaries up to £2500 per month and employers may (or may not) top this up to the full amount. Employers cannot ask furloughed employees to do any work for them, but employees can take second jobs and/or freelance. From August, employers will start to have to make contributions towards the scheme, but they can also start bringing employees back to work on a part-time basis. Alternatively, they could make them redundant.
Only time will tell, but, at present, it is impossible to rule out the possibility that the requiring employers to contribute directly to the furlough scheme (as opposed to indirectly through taxes) will lead to businesses reassessing their staffing needs and potentially deciding to cut back. This means that lenders may need to be prepared for more borrowers getting into difficulty, if only temporarily.
FCA measures to protect mortgage holders
Since March, both residential and buy-to-let mortgage-holders have been able to request mortgage holidays (provided that they were up-to-date with payments). Initially, these were for up to three months. In June, the FCA extended the respite period to the end of October.
Although payments are stopped, interest continues to accrue (unless the lender agrees to waive it which they are not obligated to do).
Provided that borrowers follow the correct procedure (i.e. agree the holiday with their lender rather than just cancelling payments), the payment break will be ignored by the credit-scoring agencies.
At the end of the holiday period, the borrower and the lender have to agree on a way forward. In particular, they need to establish whether the borrower can afford to go back on a standard repayment plan. If so, they need to determine how the borrower will make up the missed payments (e.g. by adding them to their regular payments or by extending the mortgage term). If not, they need to work out what potential solutions are available.
A cautious note of optimism
Although the post-Coronavirus environment could be a challenging one for lenders to navigate, it does not have to be a disaster. There are grounds for at least cautious optimism. For example, according to statistics from the Bank of England, during April, consumers paid back a record £7.4 billion in consumer credit and also increased deposits in banks and building societies by £37.3 billion.
The fact that people were able to make these payments shows that some people at least had some level of income over and above what they needed to cover their basic necessities.
There are still people in work and as more businesses reopen more people should be able to get back into earning money through active employment (as opposed to through support schemes). Even where jobs are lost, the employees in question may have savings and/or insurance to help tide them over. They may also receive redundancy payments to ease the transition.
Your property may be repossessed if you do not keep up repayments on your mortgage.
The FCA does not regulate some forms of buy to let mortgages.
The FCA does not regulate letting agents and we act as introducers for them.
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