Three months after the mortgage market reopened, the new normal is starting to take shape. While the pandemic has produced challenges for advisers, lenders and others in the market, opportunities have also emerged in the aftermath of the lockdown.
Since reopening in May, the housing market has experienced unheard-of levels of activity. Recent research by Legal & General Mortgage Club shows that 54 per cent of people still plan to buy a property in 2020. This demand has exceeded expectations and the stamp duty holiday on homes up to £500,000 is an extra incentive.
However, the same research shows that nearly two-thirds (61 per cent) of homeowners have no plans to sell in 2020. This, compounded by the fact that housebuilding numbers are set to drop this year, creates the potential for a mismatch in supply and demand, which further highlights the need for a strong government focus on supporting the housebuilding sector.
A recent Savills report estimated that about 171,000 homes would be built in England in 2020, down 34 per cent from 2019 as a result of the Covid crisis. In Wales and Scotland, estimates are harder to calculate because the impact on supply this year will be greater due to stricter lockdown conditions in both regions.
New-builds
We also expect demand for new-build properties to rise. The current lack of high-LTV lending for both first-time buyers and existing homeowners further increases demand for the Help to Buy scheme, as well as new-builds. As H2B is still available for borrowers with 5-10 per cent deposits, the restriction we’re seeing on 90 per cent and 95 per cent mortgages means many more people are turning to the scheme. In fact, our research found that 13 per cent of buyers intended to use H2B who hadn’t planned on using the scheme before the crisis. In total, 54 per cent of FTBs now want to use H2B.
Although the number of new-home completions fell by 56 per cent in Q2 2020, compared to the same time last year, 85 per cent of suspended housing development sites in England reopened as of mid-June, with sites and sales suites opening from mid-May. Productivity levels on these sites have also recovered significantly but, needless to say, the new social distancing guidelines will have impacted work on many sites.
That said, the sector has worked hard to return to delivering properties in a safe and compliant way. It is reassuring to see the progress developers are making to provide much needed new, affordable and appropriate housing across the UK.
Taking a closer look at FTBs, our research found that 93 per cent were still planning to buy this year. Many are even in a better position than before the crisis, with a third (31 per cent) saving more than £100 extra a week under lockdown.
However, FTBs will need all the support and guidance they can get in the new normal, particularly as they face a far more limited choice of higher-LTV mortgages. There is a clear opportunity for advisers to help these consumers navigate a mortgage market where lending criteria are changing every day. Fewer low-deposit options mean that raising awareness about housing schemes will be critical too. H2B and Shared Ownership will continue to be viable, alternative routes onto the ladder for these buyers. For those lucky enough, the Bank of Mum and Dad is lending a helping hand too, via traditional gifting or family assist mortgages.
Buy-to-let strikes back
One of the biggest shifts post-lockdown has been the return of the buy-to-let market. Landlords have faced a spate of tax changes in recent years and have not been spared the economic implications of lockdown. Yet data from our SmartrCriteria tool shows that BTL is experiencing a comeback. Criteria searches by advisers increased by 250 per cent between April and July. Interest has almost certainly been boosted by the stamp duty holiday too.
The extraordinary demand from consumers also brings hurdles – notably, operational pressures and service levels. Lenders are facing an unprecedented level of enquiries. As a result, they are having to support new customers while diverting resources to help existing borrowers returning from payment holidays.
Advisers have done a fantastic job of understanding and being patient with lenders at this time, but in some corners it is now leading to frustration. By working together with BDMs on timescales, and reviewing packaging requirements, advisers can help applications move through the system more efficiently.
There are clearly opportunities for all of us in the mortgage market post-lockdown. But to really make the most of the new normal we all need to work together.
Craig Hall is head of broker relationships and propositions at Legal and General Mortgage Club
