Private Finance's Weekly Mortgage Memo - 25th January 2021
This is our take on recent news in the mortgage market. Our views are often cited in several national publications, including; BBC News, The Times, Telegraph, City AM, FT Adviser and Daily Mail, as well as a number of key trade publications, so this should keep you ahead of the curve. If you have any questions on any of these stories, or would like further information, please do not hesitate to get in touch.
At a glance:
- Border closure could lead to a big rush for second homes and holiday lets
- Large mortgage enquiries continue as does an increase in self-builds
- Expat mortgages: Borrowers stopped due to the red, white, and blue tape of Brexit
- The mortgage market continues to open, and processing times start to get back to normal…
Border closure could lead to a big rush for second homes and holiday lets
The news that the government are on the verge of tightening restrictions will come as no surprise to anyone and there have been calls for this to be the case and for us to follow an ‘Australian’ model since the start of the pandemic. With travellers potentially facing having to pay for their own quarantine for 10 days at UK borders, this will likely put a stop to most people going abroad for a summer holiday.
- We believe that holiday let investors stand to benefit significantly from this as people holiday domestically and owners will likely be able to significantly increase rents for this season on account of increased demand.
- House price growth in the UK has been driven largely by increases outside of major urban areas and with this potential change to the government’s pandemic response this is likely to continue, as wealthy buyers look to purchase second homes soon, people consider moving out of cities altogether and landlords look beyond cities to holiday lets for a good return on investment.
- We have noticed a significant increase in the purchase of both second homes and people leaving cities altogether and have seen a significant rise in the number of let-to-buy mortgages we have been undertaking since the beginning of the pandemic, especially from those with properties in London – i.e., letting out a main residence and potentially withdrawing capital and purchasing another residence with a standard residential mortgage -
Large mortgage enquiries continue as does an increase in self-builds
We have seen no signs in the higher value end of the mortgage market slowing down with many £1m plus mortgage enquiries since the New Year. We believe this links to the fact working from home and limited travel are seemingly now the norm, wealthy buyers are snapping up larger properties with facilities to weather the Covid storm and enhance their lifestyles.
- This also links to a rise in self-build enquiries, with borrowers looking to finance the development of their dream homes, exactly to their specifications. Sometimes a cost-effective way of getting your dream home, with reduced costs like SDLT and often significant profits in the long term.
- We suspect these trends will continue for the foreseeable, but where there is demand in one area there is a fall in another, and we expect prime central London flats with no outdoor space to see a further fall in demand in the coming weeks and months.
Expat mortgages: Borrowers stopped due to the red, white and blue tape of Brexit
We have recently had clients who are British expats residing in the EU turned away for a standard residential mortgage in the UK by lenders who were, until recently, very active in this space of the market. This is regardless of the strength of the case and appears to be a blanket change in policy,
with one client, working in the pharmaceutical sector with significant income and assets, both liquid and property, being rejected by several lenders. His work has granted him the opportunity to move back to the UK on the same income package so they were planning to buy a property to move back into but have been rejected by several lenders who a few weeks ago would have almost certainly accepted the case.
- These products are still available to expats outside of the EU (with certain exclusions), but this stands to affect many UK expats with over 1 million living in the EU according to UN data from 2019. Moreover, this does not appear to be a temporary change, as one lender explained to us, "Yes this is due to Brexit, as far as we are aware this is a permanent change in policy". Luckily, we do still have other lenders who will consider the case.
The mortgage market continues to open, and processing times start to get back to normal…
Further good news for low deposit borrowers and first-time buyers as the mortgage market continues to open-up, with Santander back at 90% and Nationwide re-launching 40-year terms increasing affordability. There have also been further rate cuts with HSBC reducing all rates across all LTVs. Processing times with mainstream lenders are now getting back to pre-Covid levels too, with specialist lenders and building societies still taking longer than would be normal, but speeding up nonetheless.
- This is more sign that lenders have both adapted to the new normal, but that there has been less demand of late enabling them to catch up, following the backlog of cases due to the period of huge demand in the second half of 2020.
- We suspect the market will continue to open-up and rates continue to fall, providing the cost of borrowing remains at rock bottom and there is no major shock to the property market in the short term, however we suspect given the fact the home plays such a crucial role in all our lives in a way it may not have done previously, the market is in a strong position moving forward…