House price rises leap to four-year high ‒ RICS
A net balance of 44 per cent of respondents reported an increase over the month, significantly up from the 13 per cent reported in July and a stark turnaround from the -33 per cent back in May. The only region of the UK where surveyors did not report a rise was London, where prices have remained more or less flat over the past two months.
This price growth is being driven by an increase in demand from buyers. A net balance of 63 per cent of surveyors reported an increase in buyer interest for August, while supply is also up with a balance of 46 per cent of respondents reporting an increase in listings.
This has resulted in a third straight month of notable growth in agreed sales, with a balance of 61 per cent of surveyors reporting a rise. RICS noted that while the near-term sales expectations are generally positive, over 12 months the net balance drops to -17 per cent, likely due to concerns over the broader economic climate.
The survey also found that Covid-19 is affecting the desirability of certain properties, with 83 per cent of respondents forecasting increased demand for properties with gardens, 79 per cent predicting a jump in demand for those near green space, and 68 per cent suggesting homes with more private outside space will also be more sought after.
Simon Rubinsohn, chief economist at RICS, said there was a “strong uplift in activity”, though there are concerns that a pick-up in prices could add to affordability issues in some parts of the country.
He added: “Meanwhile the results provide a further pointer to more substantive changes taking place in household behaviour in the wake of the pandemic. Increased demand for properties with gardens and near green spaces has, if anything, increased since we tested the water in May.”
Rising confidence among buyers and sellers
Jeremy Leaf, former RICS residential chairman and now an estate agent, said that while he was seeing more confidence among both buyers and sellers, prices have not been rising sharply. Instead they are being kept in check by affordability concerns and an increase in supply, which is providing serious buyers with more choice.
He added: “Looking forward we don’t see much change at the moment, irrespective of the worsening economic news on the horizon and the possibility of a no-deal Brexit. On the contrary, the return to school and more going into work has increased the ‘why nots’ over the ‘whys’.”
Affordability issues require flexible approach from lenders
Tomer Aboody, director of MT Finance, said that the pandemic had changed buyers’ focus, increasing demand for properties with space with a home office and a garden, particularly those outside of London which enjoy good travel connections into the city.
He added: “What buyers want is the small village feel, where shops, cafes, schools and parks are available on their doorstep as they look to work more from home, whether they live in a city or not. This will push up prices in London’s many ‘villages’.”
He called on lenders to take a more flexible approach to assessing affordability, looking at applications on a case-by-case basis.
“Some buyers have a big deposit but can’t prove affordability and therefore cannot get a big enough mortgage, which can be unreasonable since a bigger deposit usually demonstrates that the buyer has been disciplined enough to save. A more common-sense approach to their finances would enable them to get the mortgage they need,” he continued.
Barclays removes daily case limits
In a message sent to brokers today, the lender noted that it had also returned to assessing applications within four working days.
“As a direct result, we have been able to increase the case booking limit within our systems,” said Barclays Intermediaries director Craig Calder (pictured).
“We seldom reached the daily case limits before 4pm during the summer but you can now have confidence that you will be able to secure a booking for your clients at any part of the day.”
However, Calder noted that there were likely to be further changes to Barclays proposition as the busy market continued into the autumn.
“We expect September to be just as busy, if not busier, so please be advised we are currently reviewing our offering to ensure we remain best placed to serve the needs of you and your clients with both products and service,” he added.
Calder thanked brokers for their support and patience during the summer, explaining that in late July there was a “mini-boom within the market” with the loosening of lockdown restrictions.
“While it was great to see demand return so quickly, this did present a challenge as we needed to ensure we continued to effectively manage capacity so you and your clients receive a consistent level of service.
“As in March, when lockdown came into effect, we took the decision to introduce a temporary case booking limit as a short-term measure of controlling volumes.
“Then, throughout August, we made several tweaks to our products as and when we felt we needed to re-address the balance.”
Dudley BS resumes lending with maximum 75 per cent LTV
The lender has returned with four products for standard residential purchase and remortgage along with a tracker for those self-employed.
The two-year fix is at 3.79 per cent with a £999 product fee, while the three-year and five-year fixes at 3.84 per cent and 3.89 per cent both have a one per cent product fee.
A two-year 1.2 per cent discount variable rate mortgage is available at 3.79 per cent and also comes with a one per cent arrangement fee.
And the self-employed product is a 1.1 per cent three-year discount with one year’s accounts required at a rate of 3.89 per cent.
Dudley also has two ex-pat products including a buy-to-let version, and eight further advance deals.
The mutual said its “immediate appetite will be restricted” as it begins to redevelop its origination via the broker market.
Dudley BS recorded record lending last year but halted new business in March as the Covid-19 pandemic hit.
Commercial director Sam Ward said she was delighted with the return to the market.
“Our packager partners have been keen for us to reopen and while we ease ourselves back into the market, our introducers can be assured that our service and ability to deliver innovative lending solutions remains unchanged,” she said.
“While we were disappointed to suspend new business acquisition one of the unexpected advantages was that it gave us more human resources to help existing customers when the Covid-19 crisis started to cause them concern.
“In many cases, we were able to offer alternative solutions which better suited particular customer circumstances,” she added.
Prime property sales double 2019 levels – Knight Frank
According to analysis by Knight Frank, even properties valued between £300,000 and £500,000 are now selling at double the rate as last summer.
The property market has been exceedingly busy since the government allowed it to re-open with lenders, brokers and other firms highlighting the extent of its upsurge in activity.
When examining Rightmove data of properties sold subject to contract (SSTC), Knight Frank found that properties valued £500,000 to £750,000 and from £750,000 to £1m had seen the greatest uplift in activity.
Both sectors had seen sales at around double the rate of last year since mid-July, with this reaching 119 per cent higher in the week ending 16 August.
The number of properties SSTC above £1m was 100 per cent higher than the same week in 2019, as had been the case through late July.
Meanwhile, properties in the £300,000 to £500,000 range were also selling at double the typical level for the last two weeks of data.
Small market share
It is worth noting that the higher value sales are a much smaller proportion of the market than lower values, and so a smaller increase in numbers will result in a far greater percentage increase.
According to data from Knight Frank, in the week ending 16 August 2019, propertied valued below £200,000 accounted for 40 per cent of sales, but this year that was just 30 per cent.
Properties valued between £200,000 and £300,000 were unchanged, but those valued from £300,000 to £500,000 grew from 23 per cent of the market to 29 per cent.
Sales between £500,000 and £750,000 also saw a notable increase from eight per cent of the market to 11 per cent in 2020, while the highest to categories saw increases of around one percentage point.
However, even so, mainstream sales are up significantly during the summer, with the number of offers accepted for properties valued between £200,000 and £300,000 more than 50 per cent higher, while cheaper properties were also well above the level of last year.
Wider behavioural shifts
Oliver Knight, head of residential development research at Knight Frank said: “Such a strong rebound reflects the ongoing release of pent-up demand following lockdown, coupled with the recent cut to stamp duty.
“It is also likely that there are wider behavioural shifts in play, as people reassess their housing needs – the ‘escape to the country’ narrative is one that has been covered in detail.”
Knight continued: “A stronger recovery at the top-end reflects the fact that such buyers financial position means they tend to be able to transact more quickly, while more affluent households are also less reliant on lending.
“For now, pent-up demand, the stamp duty holiday and extension of the furlough scheme all continue to support a strong recovery in the market.”
Metro Bank withdraws all 60, 85 and 90 per cent LTV mortgages
The lender announced the change in a communication to brokers today.
Lenders across the market have been under significant pressure as a vibrant market additionally fuelled by the stamp duty cut and coupled with workplace coronavirus-related restrictions is limiting capacity.
As a result, many are being forced to withdraw products at short notice or make significant rate increases.
Metro Bank director of mortgage distribution Charles Morley (pictured) told Mortgage Solutions: “These temporary changes will ensure that we keep delivering the high standard of service that we pride ourselves on providing, both for our customers and brokers.”
Government extends eviction ban and notice period
Evictions have been on hold since March as part of measures to protect households from the coronavirus crisis, but courts had been set to resume cases from Monday.
Campaigners had called on the government to protect renters who have fallen into debt and arrears as a result of the pandemic.
And now the government has agreed to extend the ban to protect tenants from losing their home until September 20.
Tenants in England will also get at least six months’ notice of eviction in England, an increase from the previous notice period of three months.
After this period is up courts can hear a case.
Housing charity Shelter found that more than 230,000 private tenants have fallen into arrears since the start of the pandemic.
However, landlord and letting associations want the ban to end.
Timothy Douglas, policy and campaigns manger, ARLA Propertymark said: “The whole of the private rented sector has been impacted as a result of Covid-19 but we must recognise that the courts already faced a backlog of cases prior to the pandemic.
“It is important to take steps back towards normality so that both landlords and tenants have access to the justice system, while putting measures in place to offer further support to tenants who have built up Covid-related arrears through no fault of their own.”
Anti-social tenant cases will be prioritised by courts when they start hearing cases, according to housing secretary Robert Jenrick.
He said: “I know this year has been challenging and all of us are still living with the effects of Covid-19.
“That is why today I am announcing a further four week ban on evictions, meaning no renters will have been evicted for six months.
“I am also increasing protections for renters – six-month notice periods must be given to tenants, supporting renters over winter.
“However, it is right that the most egregious cases, for example those involving anti-social behaviour or domestic abuse perpetrators, begin to be heard in court again; and so when courts reopen, landlords will once again be able to progress these priority cases.”
Lenders must improve communications as service issues make borrowers nervous, brokers say
Brokers told Mortgage Solutions they appreciated lenders were trying their best despite the circumstances, but said this had strained relationships between themselves, lenders and their mortgage clients.
They also suggested better communications from lenders would help to ease the pressure and increase confidence as borrowers become increasingly nervous.
Payam Azadi, director and partner at Niche Advice, said he understood lenders were “under the kosh” but suggested extra measures left him questioning lender intentions.
Regarding those who have asked brokers to discuss cases with business development managers (BDMs) before submission, Azadi added: “Brokers might wonder: ‘do they actually want that business?’ because if you have a case that’s urgent, you won’t place it with them.”
He also implied the often higher repricing of certain mortgages was not only risk-based, but an attempt to “stem the flow” of business.
Many lenders have urged advisers not to call as they are struggling to handle all queries, but some brokers fear this may cause cases to fall through especially with rate and criteria changes potentially making borrowers ineligible or unwilling to proceed.
Rachel Dixon, mortgage adviser at RH Dixon, said she had seen more clients than ever pull out of applications because they were nervous about their own circumstances and the market. As a result, she has begun to ask clients a list of questions so she can “cherry pick” the cases she feels most confident about.
She added: “We have this window of opportunity with stamp duty and we’re getting pressure on our end because clients are wanting to see us but we’re not getting deliverance at the other end. Everything is slow and grinding to a halt.
“How will we manage our complaints?” she said. “We’ve got six months until the end of the tax break but that’s going to be the next thing – getting everyone through before the deadline.”
Ashley Brown, director of Moneysprite, agreed: “Simply turning phone lines off or a daily lottery to secure funds is especially frustrating for advisers.”
Volume lender struggle
Azadi said that while all lenders were under pressure, it was mainstream lenders who were particularly hit as they are typically used to processing mortgages in large numbers.
“Historically lenders were confident by the aid of technology, but now more and more cases have to be individually underwritten.
“That’s not a problem for specialist lenders but it is for a volume lender. All of a sudden, they have to put a series of manual processes in,” he added.
To manage customer services, some lender staff have been reassigned to other departments but Moneysprite’s Brown said employees needed to be allocated back to broker channels to speed up operations.
He added: “Despite best efforts to manage expectations this still grates with clients and does not lead to the seamless service one would hope to deliver which can only be a bad thing for our industry.”
This is also a frustration for BDMs, Altura Mortgage Finance managing director Rob Gill pointed out, as he spoke to some who had been tasked with other duties.
“Four or five months into the pandemic it’s clear lenders are still suffering with people working from home. Maybe they don’t have the infrastructure or people around us to help us do our jobs at our best,” he added.
James McGregor, director at Mesa Financial Consultants, has been stricter with his own underwriting so cases could be “packaged and delivered as clean as possible” before it goes to a lender.
However, he said it would be best if it was made clear from the outset how long a case would take to avoid issues and so the client could be informed.
Adam Wells, co-founder of Lloyd Wells Mortgages, said he would also appreciate more communication as he was told he would be given an update on an application twice only for it not to happen.
He said: “Everyone is understanding that with working from home, service levels might drop. The important thing is to be honest and manage people’s expectations.
“A simple, ‘we hope to have your application assessed by close of business on Friday, but please don’t tell your client that as it could carry on until Tuesday’ would have prevented both myself and the lender looking unprofessional.”
Wells also suggested this experience would make him less likely to use the lender in the future.
George Roberts, mortgage and compliance director at Financial Advice Centre, said for him this meant not relying on answerphone messages or referring buyers to generic website statements when more specific information is needed.
He said: “Going forward, lenders need to embrace this ethos and focus on finding ways to manage expectations, communicate and deliver service standards in a timely fashion using the technology available we all now use.”
Brokers eye protection and BTL expansion to safeguard against economy fears
According to research conducted by MCI mortgage club of 264 firms, expanding protection and buy-to-let sales were the two most likely moves for advice firms to tackle the uncertain future, both chosen by 38 per cent of principals and senior directors.
A further 35 per cent said they would also be further focusing on remortgaging customers and the equity release market.
Perhaps unsurprisingly, the biggest concerns for the mortgage market held by the principals, advisers and administrators surveyed related to the Covid-19 pandemic.
Nearly three-quarters feared a fresh lockdown would affect the mortgage market over the next year, with other related issues being high priority as well.
Two thirds of advisers cited stricter lender criteria or mass unemployment as a concern, followed by 63 per cent noting the recession and a similar number expecting the adverse effect of payment holidays, furlough, and business support loans to make a mark.
Brexit was cited by just over a third of respondents as a key factor to hit the mortgage market, while only three per cent thought there would be no other big changes.
Despite this 97.5 per cent of principals and senior directors were confident regarding their business or employment over the next 12 months.
Second lockdown disastrous
MCI club head Melanie Spencer (pictured) said: “Understandably, as restrictions are eased over the country, everyone serving the market will rightly consider a second lockdown to be a disastrous event, especially as the market is beginning to gain momentum again.
“With the stamp duty cut until next year, the conditions are right for a sustainable bounce-back.
“Of course, it is surprising that Brexit didn’t rank as highly, or more specifically, an appropriate trade agreement by the end of the year. It could be that we’re on course for more economic disruption, just of a different kind.
“That said, it is refreshing to see the levels of confidence our respondents had, and that good proportions are looking to expand and diversify their business through protection, BTL and equity release,” she added.
Vida Homeloans relaunches with mortgages up to 85 per cent LTV
Vida was forced to halt lending in March when the coronavirus lockdown was introduced and capital markets closed-up, but after completing a £350m securitisation in July it has been able to relaunch.
Mortgage Solutions understands Vida will be expanding its proposition in the next few weeks as it rolls out to the market again.
As part of its return the lender has introduced specific criteria to tackle the new economic environment, including payment holidays, furlough and bounce back loans.
Where payment holidays are concerned, for residential and buy-to-let, applicants must have finished the payment holiday for secured and unsecured loans, with evidence of at least one payment made on their most recent mortgage or bank statement.
Residential applications from currently furloughed borrowers will be accepted provided they are returning to work within the four weeks following the application date.
However an offer will not be issued until they have returned to work and non-guaranteed income will not be included.
For borrowers who have already returned from furlough, an employer form is required along with further evidence.
Self-employed borrowers will be considered, although additional documentation and information will be required, and those utilising the government’s Self-Employment Income Support Scheme (SEISS) must be back to full-time work.
For landlord borrowers who have been furloughed, in all cases Vida will require the latest month’s bank statement, showing sufficient funds to cover three months’ payments or regular rental income from the portfolio.
First-time landlords and top-slicing are not permitted where the applicant is currently or was previously furloughed.
The same requirements and restrictions also apply to self-employed applicants.
Bounce back loans and Coronavirus business interruption loans cannot be used as part of the applicant’s income or to fund any part of the deposit.
Vida will not accept applications where these types of loans are secured against the security address. It will also require information related to the loan, for example the loan amount, the monthly payment and reason for the loan.
Regular non-guaranteed income is not acceptable for top-slicing or first-time buyer’s buy-to-let affordability assessment.
Limited company lending is open to special purpose vehicles, but not trading limited companies.
The highly active market driven by the stamp duty cut combined with social distancing restrictions for employees has meant many lenders have been hit by challenges maintaining services levels and have limited supply.
Louisa Sedgwick, managing director mortgages at Vida, told Mortgage Solutions that she was aware of the situation the lender was relaunching into.
“We will of course be monitoring applications daily. Because we don’t have a pipeline of applications yet, we can actively manage the volumes,” she said.
Sedgwick continued: “Our intention at Vida has always been to get back to lending. We want to support Britain’s underserved borrowers and we plan to return with a renewed ambition to change mortgages for good.
“As we prepare to return to the mortgage market, we’ve made our standard mortgage range of products up to 85 per cent LTV available to intermediaries through sourcing systems.
“We will be testing everything over the next week to make sure we can deliver the best possible service to our intermediary partners.
“However, we’re at the very start of a new journey for Vida and we have some exciting announcements in the pipeline as we invest in our proposition to innovate for intermediaries and our customers.
“We’ll have more to announce on these plans very soon,” she added.
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