Private Finance's Mortgage Memo - 17th August 2021
This is our take on what is currently happening 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.
- Good news for self-employed borrowers
- Headline rates only applicable to a very small number of borrowers
- The upcoming end of the SDLT holiday
Good news for self-employed borrowers
The self-employed were hit harder than most in terms of potential borrowing as a result of the pandemic and it is only in recent weeks that we are seeing significant relaxation of criteria. Recent changes from mainstream lenders are taking this further and as a result significant streamlining the application process for potential self-employed borrowers. For instance, HSBC will no longer require statements from January, February or March 2020 along with the latest 60 days’ statements, NatWest will now not need the mandatory self-employed application submission sheet (which asks questions around COVID affecting the business), nor require their “triage” team to conduct further affordability checks, and thus in terms of the application process, it has reverted nearer pre-COVID criteria. Lenders are becoming more understanding of COVID supports taken as long as things are back to normal.
- This is a step in the right direction for self-employed borrowers who may have struggled significantly to buy during the pandemic. Considering that businesses may have required a helping hand in what was a difficult time, but this is not necessarily representative of the health of the business is definitely very positive.
- Despite the recent good news, a number of lenders still will not necessarily take a holistic view on income and will take the lowest annual figure of the last 2 years and thus, if your business was particularly badly affected by the pandemic, for instance hospitality or the like it is a while yet until you will be able to get back to pre-pandemic levels of borrowing with a number of lenders.
Headline rates only applicable to a very small number of borrowers
We have seen record breaking low interest of late, especially in the 2, 3 and 5-year fixed category, with 0.83%, 0.94% and 0.96% respectively and this drives a number of potential borrowers to get in touch in search of these rates, however very few people actually qualify for them. Those that do need to be the most straightforward lending propositions with low LTV, low LTI, standard residential property, excellent credit, and no other complexities, which a surprisingly small number of borrowers actually tick the boxes for. As the best available rates get lower all potential borrowers benefit to a degree as the rates across the board decrease, but sub-1% are only available to a select few…
- These low rates are borne out a highly competitive market, with high demand and low housing supply and thus lesser transactions to boost market share as well as very cheap institutional rates of borrowing. Despite the above it remains are excellent time to purchase a property with debt or remortgage your home, however on the latter point the lowest available rate in the market, the 2-year fixed at 0.83% is interestingly only available on purchases.
The upcoming end of the SDLT holiday
While the original deadline drove a huge number of transactions in the market, given the significant £15,000 potential saving available this final tapering deadline has not created the same buzz despite the fact there are still savings to be made, albeit a max of £2,500.
- Given the high price rises of late this saving feels somewhat nominal, especially if you are looking in parts of the country that have seen 20% plus increases in the value of homes, but this was the same with the previous deadline as these price rises eroded even significant savings.
- We suspect that the end of this deadline will have no significant impact on the market. Prices remain high on account of high demand and restricted supply and depending on what happens in winter with Covid, we could see increased demand in areas such as London that did not see the large price growth as seen elsewhere. Moreover, we could even see some of those who moved to the country return to cities as working practices slowly return to normal and the move may simply not have been for them…