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Private Finance's Weekly Mortgage Memo - 15th February 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.

  • Let-to-buy mortgages: The breakout mortgage type post-pandemic
  • Increasing number of down valuations
  • Rural properties and mortgage complexities

Let-to-buy mortgages: The breakout mortgage type post-pandemic

Since the start of the pandemic we have witnessed a huge growth in let-to-buy mortgages… this began with buyers looking for a quick way to finance the purchase of second homes, mostly rural properties and now has become increasingly necessary for buyers, especially those who are struggling to sell city centre apartments… a recent example being a borrower who with her partner both owned a flat each in London and could not sell either so to buy a bigger place together had to let and remove equity from both meaning what was one mortgage now requires three…

  • Given the huge amounts of capital tied up in inner city flats and other properties that may be less favourable at present we suspect this type of mortgage will continue to see a significant growth in demand… Cities will return to normality in the not-too-distant future so if you do not have to sell at a reduced price it could pay in the long-term to hold your property and use it as an asset to borrow against and assist in repaying the mortgages…
  • Significant growth in this area could lead to many accidental landlords and may depress rents…

Increasing number of down valuations

This links to the above story as it may be a question of price as to why certain properties are not selling, especially given the changing demands from buyers. We have seen some significant examples of down valuations of late and it is no surprise that they are flats in London… One significant example is a flat in Fulham that the owner was looking to remortgage on who saw a down valuation from £2m to £1.5m and that is with the owner having bought it for £1.5m a few years ago and spent over £250k on the property in the interim period. Another recent example and another remortgage case of a flat in Twickenham, where the buyer had the property valued by agents at circa £700k, but was valued at £610k by the lender… Also affecting let to buys is the rental a property could yield, we have had a recent example of a house with market rent in the area for that type of property being around the £3,200-£3,400 mark and a valuer coming back with a rental figure of £2,000 per month, significantly altering the borrowing potential.

  • These are significant down valuations and could present borrowers with significant issues, especially if they are highly geared.
  • Flats in urban areas seem to be particularly badly affected by the pandemic and we have seen a number of cases where buyers have struggled to sell and thus had to let the properties as discussed above.
  • This disconnect between agents and lenders is on account of factoring in risk… ultimately flats, without outdoor space, that still command high prices are going to be trickier proposition sell in the short to medium term, as location and commutability are not key on buyers wish lists, rather space…

Rural properties and mortgage complexities

We have seen an increase in the number of enquiries for finance on rural properties post-the beginning of the pandemic and with rural properties come increased amounts of complexities, with a variety of things to consider; from acreage limits, annexes to overage clauses… This means that we have seen a large increase in the use of more specialist lenders who will accept some of these complexities, which some mainstream lenders may discount as standard.  

  • It is a good time for specialist lenders, and they have and could continue to see increased business levels if current trends become the norm…
  • We expect an increasing number of people will require a broker in the medium term… Aside from this, there remains significantly variation between lenders in a variety of different areas that affect borrowers and thus a greater proportion will be rejected by their own bank or mainstream lenders and seek advice…

Private Finance's Weekly Mortgage Memo - 15th February 2021

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© Private Finance Limited, 2021. Private Finance provides independent mortgage advice and arranges individual mortgage solutions for clients. Private Finance is a trading style of Private Finance Ltd, 29 Lincolns Inn Fields, London, WC2A 3EG, registered in England no. 3855776 and its Appointed Representatives. Private Finance Limited is authorised and regulated by the Financial Conduct Authority (FCA registration number 310566).

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