What is Happening in the Mortgage Market?
The following article has been contributed by Jeremy Lock, Head of Mortgage Development at Cooper Associates Mortgages, a professional partner of GTH.
Housing market
In their latest update the Office for National Statistics (ONS) reported a rise of 4.7% in UK average house prices in the year to September 2020, with average prices in England rising to a record high of £262,000.
These price increases reflect a range of factors including pent-up demand as a result of the first national lockdown in the spring and a response to the changes made to property transaction taxes, including the introduction of the Stamp Duty holiday on properties costing up to £500,000. The Stamp Duty holiday – which has stimulated significant demand - ends on 31 March 2021, with no indication that this will be extended.
Lender criteria changes
As a result of the pandemic lenders have adjusted their criteria for the employed and self-employed. Income multiples – where lenders would offer a multiple of single or joint salaries - are becoming a thing of the past. For those who have been furloughed, have had a reduction in pay, applied for government grants or bounce back loans, they can expect lenders to take these into the equation before they confirm the loan amount available. The biggest impact we have seen is with the self-employed and especially those that have taken advantage of the government grants.
Rates available
Although rates are still at a low level, they have started to increase slightly in recent months. If you are in the fortunate position of having a higher level of equity in your property, mortgage rates of below 1.5% for a five-year fixed rate are available. Rates for First Time Buyers with 90% LTV are available in the region of 3.0%, although these are increasing quickly and are heading towards the highest rates for new homeowners since 2013. It would be a brave person who could confidently predict anything with certainty over the short-term, such has been the pace of change in the last nine months, however it is difficult to envisage these rates changing significantly in 2021.
First Time Buyers and those with lower levels of equity
It has been a tough year for First Time Buyers, with an increasingly limited number of products available. At the start of the year there was a wide selection of 95% products on offer to them. However, as a result of the pandemic, lenders had to reorganise their working practices away from large call centres into working from home, in addition to dealing with a large volume of mortgage payment holiday applications. This led to the 95% products being withdrawn, with many lenders reducing their maximum LTV to 85%., thus requiring a 15% deposit, which is a tall order for any First Time Buyer. 90% mortgages were limited to ‘flash sales’ with a very limited number of deals available, with demand far outstripping the supply available.
The good news is there is light at the end of the tunnel. We have seen lenders return to the market with 90% mortgage deals as part of their core offering, for both mortgage and remortgage clients. As lenders have adapted to the new way of working – and processes are in place for dealing with mortgage payment holidays – there is real hope that lenders return with a stronger offering for those with lower deposits or lower levels of equity in their properties.
The Prime Minister has announced his desire for the reintroduction of 95% mortgages for first-time buyers, turning “generation rent into generation buy” by increasing the availability of mortgages for first-time buyers. At the Conservative Party Conference in October Boris Johnson said “We need now to take forward one of the key proposals of our manifesto of 2019: giving young, first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95 per cent of the value of the home – vastly reducing the size of the deposit. We will help turn generation rent into generation buy.”
Organising a scheme to support 95% lending when no lender is currently offering 95% products is clearly not going to be straightforward and we await further details with interest. First Time Buyers are the lifeblood of the property market and any scheme which provide them with the opportunity for home ownership is to be welcomed.
Timescales
All lenders are working at a much slower pace than they have been for years. There are a number of factors for this, including an increased volume of applications, a large number of staff dealing with mortgage payment holiday requests, more detailed application assessments as a result of the pandemic and staff working from home as a result of government guidelines. All of these factors have contributed to a slower turnaround from application to mortgage offer – we are currently looking at an average of 2-3 weeks turnaround before applications are underwritten and decisions given. Cooper Associates Mortgages is a whole of market broker and we work with a large number of lenders. In the event of a quick decision being required, we are guiding our clients to those lenders who are providing the quickest turnaround.
Our advice
Our recommendation to anyone who is planning to move in the next six months is to contact a whole of market mortgage broker and start the process early. We would encourage you to discuss all aspects of your requirements and our advisers will require a full list of documentation that will be required as a minimum by all lenders. If you are in receipt of a gifted deposit, a letter from the family member will be required, often with an accompanying bank statement as evidence. By having this information at the outset, you will give yourself the best opportunity for the underwriter to check your file for the first time and grant approval.
We would also encourage you to engage with a solicitor as soon as possible. Conveyancing departments of all solicitors are incredibly busy as a result of recent property activity. Your solicitor will require identification documentation and will also have their own forms which will need to be processed. Even though you may not have chosen your property yet, it is always a good idea to be aware of what is required, so you can then have everything prepared once you have chosen your new home.
Buying a new home, or property investment, should be an exciting time, however it can quickly become stressful without the correct guidance. Cooper Associates Mortgages are here to help take the stress away from obtaining your next mortgage.
We are a fee-free, whole of market broker, with access to a wide panel of lenders. We have a thorough understanding of the mortgage market and we can quickly identify which lenders are best suited to your own specific requirements. To find out more please call 01823 273880 or visit www.cooperassociatesltd.com.
2020 has been an unprecedented year in all aspects of life, and it is certainly true of the mortgage industry. Please find below a summary of the key events in the mortgage market over the past twelve months.
Housing market
In their latest update the Office for National Statistics (ONS) reported a rise of 4.7% in UK average house prices in the year to September 2020, with average prices in England rising to a record high of £262,000.
These price increases reflect a range of factors including pent-up demand as a result of the first national lockdown in the spring and a response to the changes made to property transaction taxes, including the introduction of the Stamp Duty holiday on properties costing up to £500,000. The Stamp Duty holiday – which has stimulated significant demand - ends on 31 March 2021, with no indication that this will be extended.
Lender criteria changes
As a result of the pandemic lenders have adjusted their criteria for the employed and self-employed. Income multiples – where lenders would offer a multiple of single or joint salaries - are becoming a thing of the past. For those who have been furloughed, have had a reduction in pay, applied for government grants or bounce back loans, they can expect lenders to take these into the equation before they confirm the loan amount available. The biggest impact we have seen is with the self-employed and especially those that have taken advantage of the government grants.
Rates available
Although rates are still at a low level, they have started to increase slightly in recent months. If you are in the fortunate position of having a higher level of equity in your property, mortgage rates of below 1.5% for a five-year fixed rate are available. Rates for First Time Buyers with 90% LTV are available in the region of 3.0%, although these are increasing quickly and are heading towards the highest rates for new homeowners since 2013. It would be a brave person who could confidently predict anything with certainty over the short-term, such has been the pace of change in the last nine months, however it is difficult to envisage these rates changing significantly in 2021.
First Time Buyers and those with lower levels of equity
It has been a tough year for First Time Buyers, with an increasingly limited number of products available. At the start of the year there was a wide selection of 95% products on offer to them. However, as a result of the pandemic, lenders had to reorganise their working practices away from large call centres into working from home, in addition to dealing with a large volume of mortgage payment holiday applications. This led to the 95% products being withdrawn, with many lenders reducing their maximum LTV to 85%., thus requiring a 15% deposit, which is a tall order for any First Time Buyer. 90% mortgages were limited to ‘flash sales’ with a very limited number of deals available, with demand far outstripping the supply available.
The good news is there is light at the end of the tunnel. We have seen lenders return to the market with 90% mortgage deals as part of their core offering, for both mortgage and remortgage clients. As lenders have adapted to the new way of working – and processes are in place for dealing with mortgage payment holidays – there is real hope that lenders return with a stronger offering for those with lower deposits or lower levels of equity in their properties.
The Prime Minister has announced his desire for the reintroduction of 95% mortgages for first-time buyers, turning “generation rent into generation buy” by increasing the availability of mortgages for first-time buyers. At the Conservative Party Conference in October Boris Johnson said “We need now to take forward one of the key proposals of our manifesto of 2019: giving young, first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95 per cent of the value of the home – vastly reducing the size of the deposit. We will help turn generation rent into generation buy.”
Organising a scheme to support 95% lending when no lender is currently offering 95% products is clearly not going to be straightforward and we await further details with interest. First Time Buyers are the lifeblood of the property market and any scheme which provide them with the opportunity for home ownership is to be welcomed.
Timescales
All lenders are working at a much slower pace than they have been for years. There are a number of factors for this, including an increased volume of applications, a large number of staff dealing with mortgage payment holiday requests, more detailed application assessments as a result of the pandemic and staff working from home as a result of government guidelines. All of these factors have contributed to a slower turnaround from application to mortgage offer – we are currently looking at an average of 2-3 weeks turnaround before applications are underwritten and decisions given. Cooper Associates Mortgages is a whole of market broker and we work with a large number of lenders. In the event of a quick decision being required, we are guiding our clients to those lenders who are providing the quickest turnaround.
Our advice
Our recommendation to anyone who is planning to move in the next six months is to contact a whole of market mortgage broker and start the process early. We would encourage you to discuss all aspects of your requirements and our advisers will require a full list of documentation that will be required as a minimum by all lenders. If you are in receipt of a gifted deposit, a letter from the family member will be required, often with an accompanying bank statement as evidence. By having this information at the outset, you will give yourself the best opportunity for the underwriter to check your file for the first time and grant approval.
We would also encourage you to engage with a solicitor as soon as possible. Conveyancing departments of all solicitors are incredibly busy as a result of recent property activity. Your solicitor will require identification documentation and will also have their own forms which will need to be processed. Even though you may not have chosen your property yet, it is always a good idea to be aware of what is required, so you can then have everything prepared once you have chosen your new home.
Buying a new home, or property investment, should be an exciting time, however it can quickly become stressful without the correct guidance. Cooper Associates Mortgages are here to help take the stress away from obtaining your next mortgage.
We are a fee-free, whole of market broker, with access to a wide panel of lenders. We have a thorough understanding of the mortgage market and we can quickly identify which lenders are best suited to your own specific requirements. To find out more please call 01823 273880 or visit www.cooperassociatesltd.com.