by admin | Apr 16, 2021 | Mortgage News
Vaccines are being rolled out and spring is rolling in. That’s two reasons for there to be good cheer throughout the UK. Will this mean good cheer for the property market? Here are some factors to consider.
The economy should be reopening
All four parts of the UK have mapped out plans to exit lockdown. Admittedly those plans will depend on circumstances. In principle, there could be halts and even backwards steps before the UK emerges from the pandemic. Overall, however, the general direction of travel should be very clearly towards a post-lockdown “new normal”.
Reopening the economy should have the very practical benefit of improving housing affordability. Of course, it would be unrealistic to expect too much too soon. It’s reasonable to assume that some sectors and job areas will recover more quickly than others. In blunt terms, the less a sector has been hurt, the quicker it will recover.
That said, as sectors recover, the benefits of recovery should begin to spread. For example, as people get their jobs back they will have more disposable income. This can then be spent at other businesses.
People will have clarity on remote working
Companies are going to have to decide whether or not they’re going to support remote working over the long term. This doesn’t necessarily have to mean full-time remote working. Even companies deciding to offer flexible/hybrid working could have a meaningful impact on the housing market.
In simple terms, if remote working goes mainstream, cities and traditional commuter-belt areas could lose their appeal. They could be overtaken by areas where people can afford more space (inside and outside). These areas could have longer commutes, but if people are making them less often this could be an acceptable trade-off.
The Stamp Duty holiday is still on
New buyers might have to more very quickly indeed if they want to get the full benefit of the Stamp Duty holiday. That said, it’s not entirely impossible. If sellers are prepared and conveyancers are available and everything goes smoothly it could be done.
Even if they miss out on the full discount, however, there is still the “consolation prize” of a lower discount available for three months after the main holiday ends. What’s more, if the Chancellor then puts Stamp Duty back as it was, then first-time buyers will still benefit from reduced Stamp Duty after the end of the temporary tax break.
Help to Buy has been extended
This isn’t exactly news, but it’s still relevant. The initial Help to Buy scheme has been extended to counterbalance delays caused by COVID19. The new Help to Buy scheme will be implemented as planned. The government has also outlined an initiative to provide guarantees for 95% mortgages. This is, however, still in the pipeline.
Interest rates remain an open question
The Bank of England advised banks to prepare for the possibility of negative interest rates. Of course, that’s not at all the same as saying that they will actually happen. It is, however, making the point that they cannot be ruled out. Although negative interest rates are not at all a new concept, they would be new to the UK. Hence it’s anyone’s guess what their impact would be.
At the same time, interest-rate increases cannot be ruled out either. Obviously, if interest rates go up, then this could reduce affordability. That said, if interest rates were going up as a result of strong economic growth, the end result could still be positive.
The housing supply is unclear
Buyers need there to be sellers. Currently, it’s unclear how much new-build and existing property will be on the market this spring. Lack of supply could put a damper on the housing market. It could, however, alternatively lead to fewer transactions of higher value.
Your property may be repossessed if you do not keep up repayments on your mortgage.
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by admin | Mar 12, 2021 | Mortgage News
The latest budget was, unsurprisingly, a lot more focussed on COVID19 than on the housing market. It is, however, also important for property professionals. Here’s a round-up of the key points.
An extension to the Stamp Duty holiday
Arguably it was almost inevitable that the chancellor would need to grant some sort of extension to the Stamp Duty holiday. After all, the logic behind this is, fundamentally, exactly the same as the logic behind the recent extension of the current Help to Buy scheme. The construction industry has been badly hit by COVID19 and now also has to deal with the full impact of Brexit.
This has resulted in delays both to the construction of new-build properties and to the legal completion process. Rather ironically, the Stamp Duty holiday may have exacerbated the latter problem by stimulating activity in the housing market.
With buyers facing the prospect of losing out on the Stamp Duty holiday through no fault of their own, arguably, the government had to act. If it hadn’t then, at best, it could have had a lot of upset buyers on its hands come election time. At worst, it could have led to buyers pulling out of sales due to being unable, or unwilling to pay the increased Stamp Duty.
What is interesting is that Rishi Sunak chose to extend the holiday until the end of June. Then there will be a further three months where the threshold is set at £250K. This means that even new entrants to the market could potentially benefit from it. It also means that there could be another “cliff-hanger” in three and then six months time.
Help for “Generation Buy”.
Back in October 2020, at the (virtual) Conservative party conference, Boris Johnson announced his intention to turn “generation rent” into “generation buy”. He indicated that the government would achieve this by introducing a scheme to guarantee mortgages of up to 95% of the property price.
Fast forward to March 2021 and the chancellor has now indicated what this means in practice. Essentially, the government is bringing back David Cameron’s Mortgage Guarantee scheme. Like the old scheme, it will be available to onward movers as well as first-time buyers. It will also be available on purchases of existing property. The current limit is set at £600K.
ISAs stay untouched
Given that the adult ISA limits have been the same since 2017, it was always highly unlikely that the chancellor was going to feel under any obligation to increase them. The one change was that the penalty for making irregular withdrawals from the Lifetime ISA will be going back up to 25% in April. It was temporarily reduced to 20% to help those affected by the pandemic.
The chancellor did announce the introduction of new NS&I “green bonds”. These are intended to help the UK meet its target of becoming carbon neutral by 2050. At present, it’s unclear whether or not these will have any direct impact on the housing market.
It is, however, worth noting that the government’s commitment to its “net-zero” target requires a switch to electric vehicles. This in turn requires the development of mass-scale charging infrastructure. Areas that get ahead of the curve here could see local house prices rise accordingly.
Widespread tax adjustments
The chancellor’s largesse on Stamp Duty has not extended to other personal taxes. Capital Gains Tax exemptions, Inheritance Tax and the Pensions Lifetime allowance all stay at 2020/2021 levels. The tax-free personal allowance and the higher-rate income tax threshold both stay at 2021/2022 levels.
At present, these freezes are scheduled to stay in place until 2025. This effectively means that people could find their take-home earnings eroded over time. In itself, this does not augur well for affordability. On the other hand, much will depend on how well the economy performs overall.
by admin | Feb 19, 2021 | Mortgage News
According to data from Halifax, first-time buyers now have to put up an average deposit of £57,278 to buy their own home. That’s £10,829 (23%) more than the previous year. First-time buyers in London have to pay over double this with an average deposit of £130,357. Here is a quick look at the drivers behind these figures and what can be done about them.
House price inflation
The most obvious reason for larger deposits is rising house prices. Despite COVID19 and Brexit, the UK has recently seen intense house-price inflation. While coincidence does not necessarily mean causality, it’s certainly interesting that this growth spurt started at the same time as the Stamp Duty holiday.
The Stamp Duty Holiday
The Stamp Duty holiday may have made a lot of people very happy. It is, however, unlikely that first-time buyers were amongst those rejoicing. They already benefited from a Stamp Duty discount. The Stamp Duty holiday effectively negated this. It put them back on the same footing as onward movers and made them only slightly better off than investment buyers.
In principle, the effect of the Stamp Duty holiday should already be starting to wear off. The closer it gets to the end of March deadline, the harder it will be for buyers to get from offer to completion by the deadline. In practice, there are two reasons why the impact of the Stamp Duty holiday might be felt for more than the next couple of months.
Firstly, the government may choose to extend the Stamp Duty holiday. It may choose to extend the overall deadline. Alternatively, it may choose to extend the holiday to anyone who has an offer accepted before the current deadline, thus giving them more time to complete. Even if it does neither, it might choose to alter Stamp Duty banding to bring in some revenue without creating a major shock in the housing market.
Secondly, what goes up does not necessarily come down again at all. Even if it does, it may not come down quickly. In other words, the end of the Stamp Duty holiday may see house prices stop rising or at least slow down their rise. It may not, however, lead to them actually falling.
Nervous lenders
At the end of the day, deposits are there to protect lenders against risk. This includes the risk of house price falls and the risk of lender default. Each lender has to decide for themselves how much of a deposit they require from each applicant. In simple terms, the more nervous a lender feels about a situation, the more likely they are to demand a high deposit.
Right now, average deposits are running between 19% in the North West to 27% in London. What’s more, they may also impose restrictions on the source of deposits. These actions may reassure anyone concerned about falling house prices triggering a rerun of 2008. They do, however, have a disproportionate impact on first-time buyers. They cannot benefit from an existing property increasing in value to help cover the cost of the deposit on a new one.
A way forward
Navigating a path through this situation could be tricky for all concerned. First-time buyers should certainly do everything they can to save for a deposit. This may include making use of the Lifetime ISA with its government-funded bonus system.
Industry, regulators and the government may, however, have to come together to organize further support measures for first-time buyers. Realistically, lenders’ hands are tied by the need to work within the framework of affordable and responsible lending. Regulators could loosen these rules, but there would be a risk to doing so.
This means that the bulk of the support is likely to need to come from the government. It could potentially come in the form of extra financial support, tax breaks, borrowing guarantees or some combination of all of these.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Feb 5, 2021 | Mortgage News
The year is still relatively new but the first month has proved both eventful and informative. Now, therefore, seems like a good time to review the mortgage landscape. With that in mind, here are some factors which could drive the mortgage market in 2021.
COVID19
It says a lot about the pandemic that it has easily knocked Brexit off the top spot in this list. Sadly, the end of 2020 did not lead to the end of the pandemic. On the plus side, vaccination is now starting to become a reality. This means that all being well, 2021 will be the year COVID19 is finally eradicated, or, at least, brought under control.
Of course, for various reasons, vaccination roll-outs are progressing at different rates in different places. This could end up having a major economic impact around the globe. If so, then, it probably should be assumed that the UK will be impacted to some extent.
That said, in the case of the UK, the impact could end up being neutral to positive. Right now, the UK is very much ahead of the curve on vaccinations. This means that it could, potentially, reopen its economy relatively early.
Initially, its trading options might be limited due to the ongoing impact of the pandemic in other countries. On the plus side, however, the U.S. is also pushing ahead with vaccinations. If it can also reopen its economy quickly, the UK may have the chance to develop a valuable post-Brexit trading partnership.
Brexit
Technically, Brexit is now complete. In practice, it’s clearly going to take some time for everyone to adapt to it. In the meantime, some companies are pulling out of the EU/NI market. Other companies are finding ways to adapt to the practicalities of Brexit.
Mortgage lenders are facing particular challenges because the Brexit deal was much more focused on goods than services. This means that lenders need to figure out how they’re going to manage existing customers who reside in the EU/EEA. They are also going to have to figure out how, or indeed if, they can onboard future customers from the EU/EEA.
There are already reports of financial services companies withdrawing or restricting facilities to customers based in the EU. Presumably, lenders in the EU are also withdrawing or restricting facilities to customers based in the UK for exactly the same reason. Both sets of customers can apply to mortgage lenders in their country of residence for property located abroad.
In principle, the UK could regain access to the EU (and vice versa) by coming to an equivalence agreement. In practice, this could still be a delicate situation for financial services as equivalence agreements can be revoked at any time. Lenders might, therefore, be reluctant to invest heavily in EU/EEA markets knowing that they could have the rug pulled out from underneath them (and indeed vice versa in the EU/EEA).
Remote working
According to data from people solutions consultancy New Street Consulting, there were three times as many remote jobs advertised in November 2020 as there were in November 2019. This will be in addition to the existing jobs which went remote during the pandemic and will now stay that way.
It may be too soon to declare the end of the office. It does, however, seem almost inevitable that many companies will at least scale back their office space. What’s more, the fewer trips staff are making to the office, the less important it is to live close to it. In other words, any shift to remote working has clear implications for the property market and hence the mortgage market.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Jan 22, 2021 | Mortgage News
Despite the general lack of seasonal festivities, the Christmas period can still be financially challenging. That being so, you may be thinking about applying for a mortgage holiday in the new year. If so, here’s a quick guide to what you need to know.
Relief is still available for people impacted by COVID19
At present, people impacted by COVID19 have until 31st March 2021 to apply for a self-certified mortgage holiday. What this basically means is that you will automatically be granted a payment holiday for up to three months without the need to go through a formal approval process.
You can then extend this up to a total of 6 months. All COVID19-related payment holidays must, however, be finished by 31st July 2021. This means that if you think you might need or want to take the full 6 months, you’ll need to have everything signed off by the end of January.
The negatives of mortgage holidays
There are two potential negatives about taking a mortgage holiday. Firstly, the holiday gives you a break from the payments. It does not, however, give you a break from the interest. How much of a negative that will be will depend partly on your mortgage deal and partly on the size of your balance.
If you have a large balance on your mortgage, then you might want to consider organizing a partial payment holiday. This would give you some relief from the payments while limiting the amount of interest which accrued during the holiday. Alternatively, you could ask your lender if you could make payments voluntarily if your circumstances allow.
The second negative is that a payment holiday can impact your credit record. Technically, a COVID19-related holiday is not reported on your payment record. The problem is that in the real world, it’s pretty easy for lenders to figure out that you’ve had a payment holiday. If you’re making regular payments, your balance is going down accordingly. If you’re on a payment holiday, it isn’t.
Again, the real-world impact of this is likely to depend on your circumstances. If you’re happy to stay with the same lender for the immediate future, then you may be prepared to take the hit. If, however, you’re looking to change lenders, then you may be better overall to make the payments, even if it’s a struggle.
After the mortgage holiday ends
After the mortgage holiday ends you either resume payments as normal or go onto tailored support measures. These will be set up in partnership with your lender. Be aware that, like payment holidays, these support measures may come at a price. For example, if your lender extends your mortgage term, you may pay less each month but end up paying more overall.
Unlike COVID19 payment holidays, tailored support measures will be reported on your credit record. Again, the impact they have will depend on your circumstances. For example, if you extend your mortgage term, you will be able to maintain a track record of regular payments. If, however, you arrange another deferral, you will be sending a very clear message to a lender.
If you switch to an interest-only mortgage, then you’ll need to think very seriously about how you’ll repay the capital. Unless you have some other repayment vehicle in place, then you will need to give up ownership of your home. This may not mean that you have to leave it. You might, for example, be able to use equity release to pay off the balance.
Selling your home
If it’s a continual struggle to pay your mortgage, then your best option may be to sell your home. This can be a hard decision to take. In fact, you may want to get professional advice before you take it. Keep in mind, however, that there are many reasons why selling your home on your own terms is better than having it repossessed.
Your property may be repossessed if you do not keep up repayments on your mortgage.
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