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Bridging Lenders Remain Optimistic for the Future of UK Economy
A recent opinion survey, published by The Association of Short-Term Lenders, indicates a positive long-term outlook for the bridging market and the UK economy as a whole. Following the budget announcement in early March, more than 73% of bridging finance providers remain confident about the long-term health of the economy, in comparison with just 64% recorded last July.
The survey shows that 87% of bridging lenders are expecting a significant increase in their business turnover over the next 6 months, with a 77% expectation that the wider bridging sector will achieve healthy growth in turnover too. These figures have shown a great improvement from the previous survey, where 36% of respondents predicted the sector as a whole to shrink, with 41% of bridging providers anticipating a decline in their own business turnover.
On the subject of competition between bridging loan providers, survey participants were divided in their opinion, with 47% believing competition will remain the same over the next six-month period and 43% expecting an increase. A mere 10% thought competition would actually decrease.
Vic J. (CEO) said, “This latest sentiment survey of the members is an important one as it gives us an opportunity to take a step back and reflect on the year we have been through”. The significant increase in positivity compared to last summer reflects not only the general optimism about the rollout of the vaccination programme but also the way that bridging lenders have been able to evolve and adapt to the changing environment.
“The sector is in a strong position to continue to support the recovery with fast, flexible short-term lending to meet the diverse needs of a range of customers.”
Furlough-Friendly Mortgage Applications Continue to Rise
Brokers across the UK reported increased demand from mortgage applicants seeking flexible and accessible mortgages, having had their employment status and income affected by mandatory business closures. Furlough-friendly mortgage activity increased almost 70% in January, followed by a further 8% increase in February, Legal & General reports.
The news has been welcomed by industry observers, among whom many had predicted stagnation or a significant decline after January’s rapid growth. With the UK having been plunged into another major lockdown, the real estate market was once again predicted to slow down.
It was estimated that approximately 4.7 million people were still on the government’s furlough scheme in February, with no clear indication as to when they would return to work.
Stamp duty holiday incentives
A major spike in mortgage application activity between December and January was attributed largely to the original March 31 stamp duty holiday deadline. Motivated by the potential to save thousands of pounds by avoiding or reducing stamp duty liability, many buyers attempted to rush through property purchases during this time.
This resulted in an unprecedented 230% spike in furlough-friendly mortgage applications between December and January, as those being supported by the furlough scheme at the time sought to take advantage of the stamp duty suspension.
With most major lenders demonstrating reluctance to applications from furloughed workers, many were turning to brokers to access specialist home loans from independent lenders not available on the High Street.
Adverse effects on financial status
The same report from Legal & General indicated a 27% increase in the number of searches brokers performed for lenders who would consider working with customers who had previously missed mortgage payments.
A spokesperson from Legal & General said that this reflects the growing number of individuals and households that have had their financial status adversely affected by the COVID-19 crisis.
As demand for desirable properties in key locations across the UK remains strong, average house prices are also increasing steadily.
According to the Office for National Statistics, average property prices in the UK were up around 8.5% compared to the same time last year. Over a 12-month period where many had expected house prices to plummet across the country, the real estate market weathered the impact of COVID-19 better than most could have predicted.
“The wide-ranging implications of COVID-19 are continuing to play out in the mortgage market, and it’s clear that advisers are playing a critical role for borrowers,” said Clare Beardmore, head of mortgage transformation and operations at Legal & General Mortgage Club.
“Not only are many focusing their efforts on finding lenders that meet the needs of those with more complex financial circumstances, including those on furlough, but they are increasingly supporting others with more affordable routes onto the ladder too.”
Prospective borrowers concerned about their eligibility for traditional high-street mortgages are being advised to consult with independent brokers rather than approaching banks directly.
How Coronavirus Has Radically Changed the Priorities of Homebuyers
COVID-19 (and three consecutive national lockdowns) have had a major impact on the lives of every person in the United Kingdom. In particular, real estate market activity has illustrated how thousands of movers and first-time buyers have completely changed their priorities with regard to preferred property types and locations.
According to the latest figures from Rightmove, London has been overtaken by Cornwall for the first time as the UK’s most desirable location for residential properties. Devon has also been propelled in the rankings to third, while Dorset now sits in 10th position after previously ranking 20th.
The findings come as no surprise to the vast majority of UK estate agents, who throughout the pandemic noted a major spike in interest in rural homes, countryside properties, and larger residential dwellings with gardens.
Interest in city centre flats and urban homes with convenient transport connections has been diminishing throughout the COVID-19 crisis as the UK gets used to a new era of working from home and spending more time than ever indoors.
A larger home is a priority for buyers
The figures released by Rightmove suggest that sales of larger homes are accelerating significantly across the country, resulting in a major shortage in inventory in some locations.
For example, five-bedroom detached home sales have increased by as much as 38% over the past year, compared to the 15% increase in sales volumes for four-bedroom flats. Five-bedroom and four-bedroom bungalows have also skyrocketed in popularity, achieving 22% and 20% growth, respectively.
Meanwhile, private renters are likewise setting their sights on entirely different rental properties, predominantly away from busy urban centres. Two-bedroom and one-bedroom flats were the most sought-after rental property types in February last year; this year, it is two-bedroom semi-detached and detached houses that have topped the rankings.
“More space has always been the most common reason for people moving home, but the evolution for many, from balancing their laptop on the end of a bed last March to making an office a permanent addition to a home, has led to a need for even bigger homes than before,” commented Rightmove’s director of property data, Tim Bannister.
Estate agents expect a gradual return to normalcy
The lingering effects of the COVID-19 pandemic could result in a permanent or semi-permanent alteration to the priorities of buyers and movers across the United Kingdom; however, many estate agents believe that the current shift in interest will gradually wane, ultimately paving the way for a slow return to normality.
This is attributed to the fact that record demand for certain property types in desirable areas of the country is already resulting in major property price increases. Average house prices in regions once considered less desirable than their central urban counterparts are predicted to skyrocket, effectively pricing many movers out. At this point, it is inevitable that many will once again have no choice but to set their sights on more affordable urban dwellings, at least partially reversing the mass exodus away from central city living.