While we're not yet 'post-pandemic', and the UK faces another series of tough lockdowns, it is fair to say that we've seen a tremendous performance from the housing market in what has been a chaotic few months.
The Revolution team reported back in November how the housing market had hit new records for mortgage approvals.
We had seen considerable growth in net borrowing, consistently low-interest rates, and the benefit of Stamp Duty holidays and Green Homes Grants driving up investor opportunities.
Alongside this came a challenge for independent brokers, with an appetite for investment continuing to grow, and yet a reluctance from many mortgage lenders to accept any element of risk in trading conditions that have no benchmark.
As we move into 2021 and look forward to a fresh year with hopes of returns to regular business, we have seen such a significant resurgence in mortgage approval ratings that the decline suffered from COVID-19 has now been corrected.
Let's look at how this has happened, and what we might expect from the new quarter.
Changing Eligibility for UK Mortgage Applicants
A couple of months back, we talked about mortgage approvals reaching a figure of 91,500 - a record since 2007.
Since then, the trajectory has continued. The Bank of England reported no less than 105,000 approvals in November, representing a new high.
The Bank says that this alignment between the relaxation of eligibility assessments, and the reintroduction of products removed from the market for much of 2020 has 'almost fully offset the significant weakness earlier in the year'.
So, what does that mean if you're thinking of buying or selling a property this year?
- Stamp Duty holidays continue to be a key driver, and it seems very likely that mortgage applications will slow down after 31st March 2021 when this reduced liability period reaches an end.
- More lenders are considering applications at higher LTVs of 90% or so. While underwriting remains rigorous, there is a greater likelihood of acceptance if you're seeking a mortgage with a relatively low deposit.
- The end of 2020 was extraordinarily busy for brokers across the UK, and this period of intense activity is expected to continue - lockdowns notwithstanding - for the next three months.
- Competition for compelling investment properties is anticipated to remain healthy, with investors looking to snap up bargains before the March cut-off.
- Many lenders are back open for business, and a deposit of 15% or above is very likely to find you a great deal on mortgage lending.
As with all sectors throughout the pandemic, we know that trading might change substantially depending on new measures or restrictions announced - but it seems inevitable that this first quarter of 2021 will be frantically busy throughout the UK property market.
We've discussed before the potential of completing a property purchase before March on a short timescale.
While that now seems less likely, given the volume of trading and pressure on lenders, there is a narrow window of opportunity that homebuyers will be keen to utilise wherever possible.
What Does the End of the Help to Buy Equity Loan Scheme Mean?
One of the significant changes heading swiftly towards us that has been much less reported than the Stamp Duty policy relates to the Help to Buy scheme.
Applications for the equity loan scheme, whereby new-build property purchases could access a 20% government loan against a 5% deposit, closed on 15th December 2020.
Those applications already in progress have until 31st March 2021 to complete, which means there is even greater pressure on Help to Buy mortgage lenders, and brokers, to swiftly complete transactions in advance of this important date.
While equity loans will now be off the table, Help to Buy itself isn't closing down altogether - but has begun phasing out towards the intended closure date of March 2023.
Given the financial burden on millions of UK residents over this last year, there is a possibility that the government will extend it - but no announcements have yet been forthcoming.
With the previous closure of the Help to Buy ISA Scheme in November 2019, it seems like first-time buyers and low-income mortgage applicants have a dwindling number of options.
What Alternatives are there to Help to Buy Equity Loans?
There are always options, and one of the less popular is the Lifetime ISA (LISA) - which in effect offers a 25% top-up on savings and is designed to help buyers save the cash required for a viable deposit.
This scheme pays in a bonus at the end of each tax year, and so savers can use this type of account to invest in.
The issue here is that only around 13 providers offer LISA products, and of those, only three offer a cash-based option, so uptake has been somewhat limited.
There is a distinct possibility that lenders will see the gap left by Help to Buy equity loans and step up to offer new supported products aimed at making British properties more accessible.
In any scenario, the best course of action for somebody looking to get onto the property ladder is to consult an experienced broker.
With the imminent decline in mortgage applications and property sale transactions after March, there is a likelihood that a slowing market will encourage lenders to entice in fresh applicants with opportunities to buy that will incentivise buyers to build on the momentum for growth and recovery we are currently seeing.
Property Market Predictions for the Year Ahead
New buyers purchasing new-builds will still have the option of applying to Help to Buy, but other schemes such as Shared Ownership are expected to see an increase in take-up volumes.
Only one month after the Stamp Duty holiday and Help to Buy loan schemes end, so too does the furlough scheme - although that may well change or adopt a new guise given the national lockdown announced just this week.
Along with the cessation of furlough support is the possibility of lower earnings, unemployment and slowing housing market activity - but as with all things over this past year, there are bound to be some surprises in store that we can't yet anticipate!
Interest rates are also expected to stay at low levels, making mortgage repayments more affordable.
While Brexit may cause an economic ripple, that too will potentially be balanced out by government stimulus programmes designed to help repair the economy as quickly as possible once the vaccine programmes are more widely rolled out.
Much is yet to be seen - but it feels like we're in for another rocky ride! We'll keep you updated with the latest news and product launches as they reach us.
For any assistance with securing expedited mortgage lending before March 2021 or exploring financial support schemes to assist you with your planned property investment, get in touch with the Revolution Brokers team for confidential, expert advice.
Contact us now to discuss your personal options, Revolution Finance Brokers specialise in commercial and residential finance in Essex, Kent, London and Hertfordshire.