What. A. Year. I know I am not alone in saying that 2020 has been challenging, both personally and professionally, for everyone. As 2021 approaches it would be nice to think we could shut the door firmly on this year; with recent news of vaccines, maybe we can at least push it to.
As I write, we are days away from the end of the latest national lockdown. Although the economic impact perhaps has not been as devastating as predicted, we’re not out of the woods yet and, sadly, many businesses won’t survive. ’Tis the season to be jolly? We will do our best.
While the impact of this pandemic has enormous repercussions for the property market, I do not want to dwell on how challenging this year has been. Instead I am going to reflect on how we in the buy-to-let mortgage sector have overcome what, at some points, seemed like the impossible.
Back in March when the country went into lockdown, the capital markets closed, physical valuations were halted and a number of BTL lenders withdrew from the market. For many of us, myself included, our entire pipelines were on hold with no real indication of when we would receive a green light. Everyone was adjusting to remote working and home schooling the kids, while anxiously watching the news.
We brokers fielded calls from worried clients, and the lenders valiantly dealt with the deluge of mortgage payment deferral applications while simultaneously trying to set up processes and infrastructure for desktop valuations. With just eight BTL lenders lending at 75 per cent LTV in April, 14 able to complete remote valuations and the application backlog increasing, there wasn’t a lot to be optimistic about.
Up and running
And yet, within two months we had 21 BTL lenders back at 75 per cent LTV and completing desktop valuations, which given the circumstances was a miracle. In mid-May, surveyors received the go-ahead to resume physical valuations under new health and hygiene restrictions, meaning that the build-up of mortgage applications could slowly begin to complete. Estate agents took on their own technological challenge of virtual viewings; before the second lockdown, around 17 per cent of viewings were being completed remotely.
And, of course, all these new ways of working have been truly tested with the colossal response to the stamp duty holiday. Mortgage offer approvals rocketed to a 13-year high in August, with a 28 per cent increase on July. While this was only a slight compensation for the almost two months of inactivity in the spring, I still think it’s worth celebrating that estate agents, brokers and lenders managed to process that amount of business given the circumstances. Furthermore, with so much pent-up demand due to the political uncertainty (Brexit, the election) at the end of 2019, followed by lockdown, house prices have continued to rise; 4.7 per cent, according to HM Land Registry’s UK House Price Index, and 5.5 per cent, according to Rightmove, which predicts a 7 per cent peak in December.
Keeping up with lenders
Looking more specifically at lender activity, it’s been exciting, hasn’t it? Lenders have been releasing, withdrawing and tweaking products and criteria almost daily; quite the challenge to keep up with.
Those choosing to remain in the market at the start of the first lockdown reduced their risk by generally offering a maximum of 65–70 per cent LTV. For the few lenders still accepting complex properties such as HMOs and multi-units, pricing went up. In the case of holiday lets, as the entire industry shut down, many lenders withdrew from this area, only to reappear when the market went into overdrive during the summer.
Back in September I wrote at length here about why lenders needed to make these frequent adjustments. As slow as service has been these past few months, I’m sure it’s far preferable to their completely falling over under the sheer volume of applications.
Where are we heading? Recent reports seem to suggest the property market is beginning to slow, in part because all the prime properties have likely sold, and because it’s getting increasingly difficult to guarantee completion before 31 March.
Will house prices fall as demand wains? Yes, although I doubt beyond 5 per cent. Could this offer investors an opportunity to pick up some property deals in the new year? I expect so.
March will certainly be a frantic hive of activity. Beyond that, however, it is difficult to predict with any conviction where the industry is headed.
But I don’t think we are alone in that.
Jeni Browne is business development director at Mortgages for Business
