property market busiest in a decade
The runaway housing market is showing no signs of slowing, with buyer demand outstripping supply at the fastest rate in a decade. The latest index from property portal Rightmove found that the number of potential buyers enquiring about each available property is 34 per cent higher than a year ago.
Just a year after the UK entered its first lockdown in an effort to deal with the pandemic, and the housing market closed completely, its subsequent recovery is little short of astounding. The stamp duty holiday, and its extension in the Budget earlier this month, has played a big part in boosting confidence in the market, which was already high.
Win-win scenario for buyers
Buyer demand has dramatically increased over the past year due to the experience of lockdown and resulting demand for more space, both inside and out. Many Londoners have been looking for much larger pastures new, heading to the traditional commuter belts of Surrey, Hampshire, Sussex and Berkshire, and even further afield such as Norfolk. Those who are unlikely to be in the office every day once something more akin to ‘normality’ resumes are discovering an appetite for a longer commute. This opens up whole counties that may have been considered off limits before, and relatively cheaper property prices. This, combined with low mortgage rates, makes it a win-win scenario for buyers.
While we live in such a low interest-rate environment – the Monetary Policy Committee unanimously voted this month to keep interest rates at 0.1 per cent – the market should remain bullish in the short term at least. With lenders returning to 95 per cent loan-to-value mortgages thanks to the introduction of the government’s mortgage guarantee scheme (Yorkshire Building Society is the first lender out of the blocks, with others poised to follow suit in coming weeks), this will further boost demand. We have already seen an uptick in lending for renovations and will continue to do so as homeowners consider opportunities to add floor space and develop in the garden.
Demand is such that more stock is urgently required, however. Hopefully, the traditional spring selling period will bring more properties to market, with many buyers waiting to pounce. Those who are thinking of selling will certainly find an eager audience. Easter is traditionally busy for the housing market – properties and gardens begin to look their best, while this year the continued rollout of the vaccination programme and easing of lockdown rules will provide added impetus.
Uncertainty ahead?
While the strong start to the year suggests that 2021 will be a boom year for the market, much will depend on what happens over the next few months as restrictions ease. There are plenty of people who wish to purchase somewhere bigger or plan to remortgage and raise extra funds for improvements, but we are yet to see the full impact of unemployment as businesses emerge from lockdown. How will those who have taken mortgage payment holidays be treated when they come to remortgage? What about those who have been on furlough? Are lenders showing empathy towards these situations or will all borrowers be tarnished with the same brush as the self-employed seem to have been?
Ultimately, there will be a different landscape as people and businesses adapt. Those who have been made unemployed may consider different areas and trades, perhaps becoming self-employed or as contract workers for bigger entities. Some big City businesses have said they won’t return to the office environment at all – what impact will this have on people and their desire for office-based roles with regular contact with fellow workers?
Specialist lending coming into its own
There will be growing need for specialist lending and products and it is unlikely that the bigger lenders will be able to accommodate this. This presents a brilliant opportunity for specialist lenders to step in. A common-sense approach to lending, which is something the bridging industry is very much predicated upon, will really come into its own. The problem is that as lenders grow, everything becomes more automated and score-card driven – they can’t carry out manual underwriting in the same way as they did when they were a smaller concern, so they don’t have the flexibility to look at things in a different way.
It is an area that needs addressing because of furlough and people losing their jobs. Of course lenders must be commercial but old -fashioned values of underwriting the client are so important. Much comes down to the interpretation of risk – the applicant on furlough waiting for their hairdressing business to reopen will be turned down by many lenders. Yet with their calendar fully booked for April and May as customers are desperate to get their hair cut, are they really a lending risk?
How MT Finance can help
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