An Overview of the Mortgage and Housing Markets
A great deal has changed since my last blog on this topic in June this year. Many of the changes could have been predicted but some are surprising as the mortgage and housing markets returned to something like normal activity following the shutdown in the spring and early summer.
Many lenders still have staff who are furloughed, self-isolating or working from home. The consequence is that, generally speaking, service standards are poor by which I mean, speaking as a broker, the time from submission of a mortgage application until the formal offer is issued is much longer than customary.
However it is also clear that some lenders have adapted much better than others to the difficulties they are all facing. I find myself increasingly recommending those lenders where service standards have been maintained even if from my mortgage sourcing software those are not necessarily the ones with the lowest rates.
As a general observation smaller organisations, especially local and regional building societies, have adapted much more quickly than their larger cousins.
Stamp Duty Land Tax (SDLT)
The stamp duty holiday announced by the Chancellor in July has had the desired effect of a marked increase in house sales activity. If you are buying speak to your solicitor for an estimate of the SDLT payable but broadly the rules are:-
- No stamp duty is payable on purchases up to £500,000 or on the first £500,000 of properties being purchased for more than that figure. Completion must take place by the 31st March 2021.
- The holiday only applies to the first property owned. The 3% additional stamp duty, on the whole of the purchase price, still applies on the purchase of second and subsequent properties.
- By putting the March deadline on the SDLT holiday there will inevitably be a sense of “buy now whilst stocks last” over the coming months and I dare say brokers, surveyors, lenders and solicitors will all come under increasing pressure as the 31st March deadline looms.
Surveyors for lenders are generally now doing physical valuations although some surveyors and lenders are still using the automated valuation model (AVM) referred to in my June blog.
An AVM is essentially a “desk-top” valuation which does not necessitate a physical visit to the property and the surveyor makes use of house price index data and looks at the recent sale of similar properties in the locality.
The time taken by surveyors to visit properties and prepare a report is longer than would usually be the case partly caused by the backlog built up during the shutdown and party caused by increased market activity.
The recent Nationwide and Halifax house price indices both show house prices increasing by 5.00% and 7.30% year on year, respectively.
However, a recent report by the RICS suggests that such house price rises are likely to be temporary and are the consequence of a short term increase in prospective buyers chasing too few properties.
The consensus seems to be that the trend will be reversed once the backlog of activity and the SDLT holiday are out of the system. After that the prevailing view is that house prices might fall.
First Time Buyers
My research today (13th October) shows only two lenders willing to advance up to 90% loan to value (LTV). I know from recent experience that, perhaps inevitably, service standards at lenders offering high LTV mortgages are particularly poor and the time to offer is especially slow.
In practical terms first time buyers are having to find at least at 15% deposits to avail themselves of a reasonable choice of lenders at decent rates of interest.
There doesn’t seem to be much appetite for higher loan to value advances amongst lenders. The government has recently announced their desire to broaden home ownership and it might be that pressure is brought to bear on lenders to make high LTV advances more readily available.
The government continue to help, of course, through the Help-to-Buy loan scheme for brand new properties. Up to 95% of the purchase price is available, usually 75% from the lender and 20% from the Help-to-Buy scheme.