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Private Finance's Mortgage Memo - 12th January 2022

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.

  • Why buyers are looking to “leapfrog” instead of “climb the ladder” and what this means for the mortgage market
  • Demand still incredibly strong at the start of the New Year
  • Increase in enquiries from expats and foreign nationals

Why buyers are looking to “leapfrog” instead of “climb the ladder” and what this means for the mortgage market

A rather interesting trend has emerged in recent months where we have been seeing an increasing number of clients looking to “leapfrog” or in other words jump up a few rungs on the housing ladder with their second property purchases, stretching their borrowing to the maximum to secure a home for the long-term rather than gradually working towards it. We have had several clients like this recently, for instance one client is selling their £450k flat to purchase a £2m home and another selling at around £500k and buying at £1m. In the past these clients would likely have made another one or two purchases before buying at this value and this marks a change in buyers outlook and links to a trend, we believe we will see in the mortgage market with increased consumer demand for longer term borrowing (5-year fixed and above).  

  • We believe this is caused by a combination of the high cost of housing in combination with the high cost of SDLT. For instance, 10 years ago in 2011 the SDLT on a million-pound property would have been £28,750 with the highest SDLT band at 4% over £500k, this would now be £43, 750, an increase of 52%. Moreover, there would have been far fewer properties at this price point – in 2010 it was estimated that there were 170,000 properties worth more than £1m and in 2021 this number stood at an estimated 550,000. If buyers were to purchase another property in between they would be subject to both the extra SDLT and all the extra fees associated with moving, however it is important to recognise that there is one major factor enabling borrowers to leapfrog up the ladder and that is the low interest rate environment and lenders relaxing criteria enabling borrowers to maximise their loan-to-income and loan-to-values.

Demand still incredibly strong at the start of the New Year

We are continuing to see high levels of demand in the housing market, made more acute by the supply side constraints. Our agency partner Jackson Stops recent data indicates that nationally there are 19 buyers for every newly listed home and in the Southwest of England this demand is even greater with 23 buyers for every newly listed home. This mirrors our experience at present with lots of our clients ready to make the move but waiting to find the right property to purchase.

  • We are seeing valuers needing to play catch up having been affected by the Christmas break and Covid, for instance not being able to enter home due to the virus and with case numbers where they have been many valuations have been re-scheduled several times. For instance, we are seeing valuations take 3 weeks to book in in some areas as there are no available valuers due both to a backlog and absence – all of which serves to limit supply further.  
  • With many people having sold their houses to upsize in 2021 and sitting on their cash until they find a suitable property, we can expect both an increase in cash buyers in 2022, but also shorter buyer chains and thus faster completion times.
  • Restricted supply will continue to push up house prices, but as prices reach record highs it should push some owners to put their homes on the market, especially once they see more viable properties for their next move. We suspect rising interest rates will give people a big impetus to undertake a move sooner rather than later if it is something they are planning to do.

Increase in enquiries from expats and foreign nationals

In December and January, we have seen increased demand from foreign nationals and expats looking to purchase UK property. The UK has always been a very desirable place for foreign property investment, but what is interesting about the recent enquiries is they are not all HNW’s looking at £1m plus London property, but those looking at all sorts of property and values both in London and outside.

  • The UK is one of the least restrictive places Covid wise which could be a major driving factor for purchasers and interlinked with this is the fact that is the strong economic growth projections, the strongest of the G7 which is a further driving factor.
  • London property has not seen the price rises that the rest of the UK has and thus buyers may be lured by what they see as good value in a market that is set to grow significantly again once the status quo resumes.

Private Finance's Mortgage Memo - 12th January 2022

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© Private Finance Limited, 2022. 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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