This week it is all about property prices in 2021 and stamp duty holidays at a time when most people make their annual predictions around property prices and transaction numbers.
You are either very brave or very foolish to make predictions in this environment, so with that in mind, well why not?
What is interesting is that despite the uncertainties in the economy, people’s desire to take advantage of the Stamp Duty holiday drove mortgage approvals to a 13-year high in November. Likewise, December saw property transactions reach fever pitch as people rushed to beat the Stamp Duty deadline.
The increase in transaction levels, as reported by HMRC, was up nearly a third on the previous year. This is all the more impressive given that a lot of people in the latter stages of 2019 were keen to get into a new home before the Brexit endgame and the uncertainty that might entail.
The closing stages of 2020 were among the busiest we’ve ever been as a broker. That looks set to continue in the first quarter, too, ahead of the looming Stamp Duty deadline.
The main House Price Indicies saw substantial gains last year with Halifax stating that property prices rose 6% and Nationwide 7.3%, but there is every expectation that this will not continue during 2021.
Although it seems things are pretty bleak as we sit in Lockdown 3, there is now light at the end of this very long tunnel; not only is a Brexit deal done, but there are now several potential vaccines. We do not know how the economy will be during the early part of this year, and there is the small question of paying back all this Government help, but once things do start to stabilise there is every chance of a spending-led recovery.
There remains, even now, pent-up demand in the property market, and together with a lack of property as ever, those expecting a large correction look set to be disappointed yet again.
The pace of growth will undoubtedly slow and it seems therefore realistic that we will see house prices settle this year somewhere between the -2% fall and the +2% growth. OK, so that’s quite a wide gap, but as ever with house prices, this will vary between regions, with some doing much better than others.
In terms of transaction numbers, obviously, the first part of the year will see big numbers as the race to beat the 31st March deadline intensifies, before dropping off, perhaps substantially. I do expect things to come back however after the summer period and all those First-Time Buyers unable to buy now will come back to the market as lenders once more welcome them back into the fold.
Therefore overall we will probably be in the region of 1 million transactions again in 2021.
At present, if you’ve got a deposit of 15% or more, there’s an abundance of products and it’s pretty much business as usual in the mortgage market.
In contrast, 95% loan-to-value mortgages remain a pipe dream for the vast majority of people in the current market unless you are buying a new build through the Help to Buy scheme. In most cases, you can forget it.
The good news is that another few lenders have come back into the First-Time Buyer space with 90% LTV mortgages, so we now have a good suite of lenders offering these products again.
Whilst there is nowhere near as much choice as we had previously, at least there are offerings now from most of the big lenders. HSBC returned to 90% LTV lending last week and joined the likes of Virgin Money, Coventry, Halifax, NatWest, Barclays, Platform, and a couple of others.
They are available at rates around the 3% mark which is considerably more expensive than they were a year ago, but after the stamp duty holiday is done and dusted expect reductions in these products.
Even though it’s got a little bit easier to find a mortgage at 90% loan to value, getting a mortgage with just a 10% deposit remains challenging and the underwriting can be forensic to say the least. Don’t worry though, we can help with that!
I think we are starting to see lenders beginning to think about life after the stamp duty holiday and begin the long, slow road back to normality. There is certainly no mortgage price war yet, but this could well change in Quarter 2 / 3 as lenders still have a lot of money to lend out and will want to make the most of the pent-up demand that has been building from First Time Buyers and those needing higher LTVs who have not had the products available to them.
The issues around Mortgage Payment holidays have not materialised as lenders feared, which is a good thing, and much depends on the coming weeks in terms of vaccinations and the economic effects of the pandemic.
But there is room for some optimism as an awful lot of people have actually been able to save a lot through the past year and the spending spree that comes when we do emerge from this will include homes and property.
Another challenge facing borrowers ahead of the Stamp Duty deadline is timescale, as lenders, valuers, and especially conveyancers are experiencing bottlenecks and delays given the sheer amount of applications going through. and the administrative upheaval caused by the latest lockdown will only serve to accentuate them.
Though the property market remains technically open, there will now be considerably more logistical issues for the simple reason that a lot of people will be working from home.
We would not be surprised if the Treasury makes an announcement in the coming weeks about extending the Stamp Duty deadline to keep demand alive and give the property industry some much-needed wiggle room, but there is no guarantee of this.
Our advice to anyone putting an offer in now is to be prepared to have that additional stamp duty payment just in case and instruct your solicitors to start their work as early as possible, especially in applying for the local searches. Vendors meanwhile, may need to prepare to do some last-minute negotiations.
Until then, we keep smiling and carry on.
In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 1.14%, (3.80% APRC) and 5-year fixes from 1.34%, (2.80% APRC) whilst variable tracker rates are around from 1.57%, (3.10% APRC).
Those looking at Buy-To-Let can now obtain products from 1.19%, (4.40% APRC) for 2-year fixed or 5-year fixes are available from 1.64% (3.80% APRC).
For more information and to speak to one of our friendly, professional advisers call us on 020 7220 5110 or send a message via our contact form.