0116 464 5544News
Three Property Market Trends to Expect in 2021
Attempting to accurately project trends and shifts in the UK property market for the year ahead is never easy. Compounded with the chaos 2020 brought to buyers, sellers, investors, and developers across the country, it is difficult to voice any outright assurances for the year ahead.
Recent activity over the past couple of quarters, however, coupled with comparisons from previous times of economic crisis, highlights a series of possible scenarios by 2021. The majority of independent experts and advisers foresee the following three trends playing a major role in the housing market over the next 12 months:
A slowdown in property price growth
The combination of pent-up post-lockdown demand being released on the market and the chancellor’s stamp duty holiday resulted in a massive surge in property sales and purchase activity towards the tail end of the year. Give things another three months or so, and a pronounced cooldown is inevitable, which some anticipate could lead to a halt to house price growth.
For the year, Capital Economics believes that average house prices could fall by as much as 5% by the end of next year. This is something of a doomsday scenario; others predict a much gentler slowdown, which is unlikely to affect average house prices in most key areas.
Borrowers looking beyond the high street
As major banks and lenders continue to tighten their lending criteria and complicate application processes, the whole thing is playing directly into the hands of alternative finance providers. Development finance providers and bridging loan specialists have noted a major spike in activity, fuelled by the growing complications associated with seeking help on the high street.
Independent lenders have demonstrated their value and importance throughout the COVID-19 crisis, during which many conventional lending channels have been closed completely. The flexibility and affordability of bridging are proving popular among private customers and business borrowers alike. Meanwhile, specialist development finance continues to offer a lifeline to developers looking to get back to business in post-lockdown Britain.
Major property market performance disparity
Lastly, there will continue to be a major disparity in housing market performance and average property prices from one region of the UK to the next. But what will be different this time around is the prominence of property investment and development hotspots far outside the usual safe havens.
As people continue to flee from major cities in search of more tranquil rural retreats, areas of the UK once overlooked could burst into life in 2021. In particular, the Northwest and Midlands are widely expected to outperform the South and Southeast—something that could not have been predicted as recently as a couple of years ago.
Controversial Computerised Housing Allocation System Revisited and Adjusted
Government ministers have confirmed that a controversial computerised system used to determine where new housing should be built in England has been adjusted, following a furious backlash from a group of MPs.
The revision of the computer-based formula will ensure greater emphasis is placed on the urban areas and cities in the Midlands and North, ministers confirmed this week.
Those opposing the system in its original form argued that excessive emphasis was being placed on London and the South East, which, according to some, would have led to large proportions of the region effectively being “concreted over.”
Introduced in August, the computerised system was designed to provide local councils with a basic estimate of how many new homes needed to be built in their localities, all of which was geared towards the government’s broader target of 300,000 new homes to be built in England every year by the mid-2020s. However, a group of Conservative MPs voiced criticisms regarding placing such important decisions in the hands of a “mutant algorithm,” which was feared to be fundamentally flawed from the outset.
A shift in supply and demand
The coronavirus pandemic has had a major impact on the housing supply situation in England. With millions now working from home on an indefinite basis and e-commerce booming, business properties and shops all over the country are sitting vacant.
It has therefore been suggested that, to a certain extent at least, it may be possible for some business zones and commercial centres to be repurposed as affordable residential neighbourhoods.
The government’s confirmation of an alteration to the computer-based system suggests it is a possibility that is being actively explored. Rather than focusing predominantly on rural and semi-rural areas around London and the Southeast, housebuilding emphasis is now being shifted to brownfield urban locations in Northern England and the West Midlands.
But while the adjustment is likely to attract praise from any of those who initially criticised the idea, it may make it difficult or impossible for the government to fulfil its guarantee of affordable housing in attractive areas people actually want to live in.
Issues with brownfield site development
Brownfield sites have a tendency to be less than desirable places to live, often due to their inconvenient locations. They can also be extremely expensive and challenging to develop, perhaps due to contamination by industry or the shape and condition of the land.
Where existing business and commercial premises have been repurposed into affordable housing, there have often been serious issues with quality and safety standards.
Former Prime Minister Theresa May labelled the semi-automated system “ill-conceived” back in October, while former Foreign Secretary Jeremy Hunt said that the government was guilty of clearly “undermining” local democracy by going ahead with the initiative without widespread support.
The Conservative Party remains adamant that it will achieve its target of building 300,000 affordable new homes each year in England by the mid-2020s, an assurance even its own backbenchers are beginning to dispute.
Predictions Point to a Prosperous Year Ahead for BTL Landlords
COVID-19 and the first national lockdown plunged the entire UK property market into a state of unprecedented chaos. For the most part, the sector was shut down in its entirety, rendering it impossible for most property sales and purchase transactions to go ahead.
Buy-to-let landlords were also hit hard and, in many instances suddenly found themselves with tenants who simply couldn’t afford to pay their rent. Elsewhere, buy-to-let landlords faced the prospect of their properties sitting vacant indefinitely, causing issues with their own property loan repayments and general overheads.
In total, it was estimated that 54% of tenants contacted their landlords at some point during 2020 to discuss a rental holiday.
A more reassuring outlook is ahead
Despite all the doom and gloom the past 12 months brought to the buy-to-let sector, experts are predicting a more positive year ahead. The residential property market across the UK in general has seen a surprising and continued strength, which most anticipate will continue throughout 2021.
Buy-to-let landlords are also expected to enjoy a more prosperous year ahead, particularly those who take advantage of the government’s temporary stamp duty holiday within the next few months.
Speaking on behalf of Ludlow Thompson, chairman Stephen Ludlow commented on the surprising yet welcome performance of the buy-to-let sector in the face of such adversity.
“The buy-to-let market has continued to provide a reliable return on investment for landlords, even during the worst of the pandemic when other forms of investment went through a period of intense volatility,” he said.
“The historic resilience of residential property means many private investors are still looking to add to their holdings, particularly before March 2021, when the stamp duty holiday ends.”
Shifting priorities and preferences among movers
Mr. Ludlow also went on to provide advice for new and existing landlords looking to make the best of the current situation and adapt to their tenants’ shifting priorities.
“We would advise existing and prospective landlords to consider re-purposing their properties to meet the changing needs of tenants,” he said.
“With people spending more time at home, having extra space both indoors and outdoors has become more important than ever. Outdoor areas and home offices are both in very high demand, as is accessibility to high-speed internet.”
Working from home has triggered a major shift in priorities and preferences among home buyers and property renters alike. The more time people spend in and around their homes, the greater their interest in more spacious and comfortable properties with private outdoor living spaces.
Rural and coastal towns and villages have become property hotspots for buy-to-let investors and homebuyers as attention turns increasingly away from cities and major urban city centres.
Furloughed Workers Are Increasingly Seeking Broker Support for Mortgage Applications
New research suggests that residential mortgage brokers are conducting more searches on behalf of furloughed workers than at any time since the height of the initial UK lockdown. According to a report published this week by Knowledge Bank, the term ‘furloughed workers’ is once again within the top five searches being carried out by brokers for residential mortgage customers.
This suggests that the chancellor’s confirmation of the extension of the furlough scheme has encouraged many prospective home buyers and those interested in remortgaging their properties to go ahead with their plans, despite the economic impact of the second lockdown.
Brokers are reporting a wave of interest from borrowers unable to qualify with conventional High Street banks, the vast majority of which make it extremely difficult for furloughed workers to obtain a mortgage or refinance their home. Use our mortgage calculator in the UK to find out just how much a mortgage would cost you.
There’s also evidence to suggest that the impending end of the temporary stamp duty holiday is motivating many to take action in order to save thousands of pounds on the purchase of their property.
‘Soft footprint at decision in the principal stage’ search volumes up
Other popular search terms among mortgage brokers once again within the top five indicate that customers with low credit scores (or concerns about their credit history) are also approaching brokers for help in growing numbers. Soft footprint DIP searches are ideal for those who have reason to believe their application may be rejected, to subsequently protect their credit score from further harm if they are refused a loan or mortgage.
Interest in the government’s Help to Buy scheme also remains elevated, according to the figures from Knowledge Bank. The lender also reported elevated numbers of ‘first-time landlord’ searches among brokers in the buy-to-let market, along with the first ever entry of ‘first-time bridges’ within the top five searches conducted.
Impressive overall market performance
Despite the obvious complications the sector faces at the moment, the figures from Knowledge Bank suggest that the market is performing better than most could have realistically predicted.
“The only constant at the moment is change. With the furlough scheme back, discussion around an extension to the stamp duty holiday, and record numbers of mortgage approvals, the property sector continues to move at a rapid pace,” commented Matthew Corker, lender relationship manager at Knowledge Bank.
“Some trends are continuing, with max LTVs again being a hot topic. Lenders are responding, and in November, many LTVs were gradually increased back to pre-Covid-19 levels; however, an increase in new broker searches such as soft footprint DIP and ‘First Time Bridgers’ shows how the market is constantly changing.
“Lenders are constantly adapting criteria to keep up with the evolving market. It is now physically impossible for any mortgage broker to keep all the different criteria in their heads. So, it is now more important than ever for brokers to use a comprehensive criteria search system to ensure they can provide their clients with the best advice and evidence that they have done so.”
The Equity Release Market is Tipped for Major Growth in 2021
Independent brokers and financial advisors across the country are projecting a successful year ahead for the equity release market. With interest among customers having remained surprisingly high throughout 2020, even in the face of major economic uncertainty, three-quarters of experts anticipate significant market growth over the next 12 months.
Specifically, new data published by Canada Life suggests that many financial advisors anticipate the value of the equity release market to exceed £6 billion in 2021 for the first time.
Modest yet reassuring gains
The figures from Canada Life suggest that around 42% of financial advisors experienced growth in their equity release activities during 2020. While this is not particularly impressive growth, it is nonetheless reassuring given the financial impact and uncertainty of the COVID-19 pandemic.
Many had expected the market to grind to a complete halt, when in reality it remained ‘business as usual’ for a surprising proportion of lenders.
As a result, 62% of advisors now believe that the equity release market will be operating at pre-lockdown levels by the end of the second quarter next year. It’s also widely predicted that the market’s performance will continue to accelerate indefinitely as more people than ever before express an interest in equity releases.
Changing priorities and purchase intent
Meanwhile, Canada Life’s figures indicate a series of interesting shifts in how those planning to release equity in their homes intend to allocate the funds raised. Evidence also suggests that the average equity release customer age in the UK will also reduce: 50% of advisors predict a spike in popularity among younger homeowners next year.
45% of experts also see more equity release customers applying for bigger loans, releasing much larger proportions of the equity tied up in their homes.
As for the allocation of the funds, 70% of advisors predict that their customers will give portions of the proceeds to their children or grandchildren next year. 65% see equity release funds being used to pay off debts, marking a slight reduction from the 71% recorded in 2020.
The primary motivations among equity release customers for leveraging the money tied up in their homes are expected to remain the same next year. These include paying off the debt during retirement, concerns regarding insufficient pension savings, and the ongoing volatility of the stock market. Get help working out the costs of paying a mortgage using our UK mortgage calculator.
In addition, the impact of COVID-19 on people’s finances, income, and long-term financial stability is also likely to influence decisions regarding equity release.
“There is no doubt 2020 has been challenging for many reasons, but it is great to see so much positivity looking forward to next year,” commented Alice Watson, Head of Marketing at Canada Life.
“Advisors are clearly anticipating a growth in demand driven by both improved awareness of equity release and families reassessing their finances in light of the pandemic. Predictions around a shift in customer age and an increase in loan size point to a move in how homeowners view their home as a financial asset, much like pensions or ISAs.”
“The world is changing around us, but closer to home, we need to consider how best to use our overall wealth to provide the secure financial futures we seek. Advisors are best placed to show clients how to plan for that future.”
Bankruptcy Mortgages Explained
Contrary to popular belief, bankruptcy will not necessarily count you out of the running for a mortgage. A history of bankruptcy on your file can create additional challenges, but it does not make qualifying for a mortgage impossible.
It is simply a matter of carefully considering the options in order to pair your requirements with an appropriate lender you can count on.
How soon after bankruptcy can you get a Mortgage?
In the immediate aftermath of declaring bankruptcy, qualifying for any kind of credit can be extremely difficult. Particularly when major banks and lenders are concerned, those who have recently been declared bankrupt are excluded from almost all lines of credit across the board.
Any history of bankruptcy in your financial history will appear on your credit file for a period of six years. During this period, you can expect to be scrutinised by the vast majority of mainstream lenders when applying for lines of credit. The more recent the bankruptcy, the lower the likelihood of qualifying for a loan.
If you are considering applying for a mortgage during this period, you will need to take your business to a specialised lender. Away from the UK High Street, there is an extensive network of flexible and accommodating specialists who welcome applicants with flawed credit histories. Even those with recent bankruptcies are not necessarily ruled out of contention. You can even use our UK mortgage calculator to work out the cost.
You may have recently been declared bankrupt, but you may also be in an extremely strong financial position with a provable source of income. Likewise, you may already own one or more properties, against which you may be able to secure a loan to access the funds you need.
Bankruptcy need not prevent you from qualifying for a mortgage, but it is essential to seek independent advice before applying. Consult with an independent broker to discuss the available options and choose an appropriate course of action.
What size deposit do you need?
With all types of ‘substandard’ finance, bigger deposits make it easier to qualify for a competitive loan. During the first couple of years following bankruptcy, you may be required to provide as much as 40% as a minimum down payment. Over the subsequent two to three years, this could fall to as little as 25% or even 15%.
If you declared bankruptcy six or more years ago, there is a good chance you will qualify for a mortgage with a deposit as low as 10% or even 5%. Though it is worth bearing in mind that the larger the deposit you provide, the more likely you are to be offered a competitive rate of interest and reduced overall borrowing costs,
Larger deposits often hold the key to not only qualifying for a poor-credit mortgage but also ensuring you access a competitive deal. If possible, it is therefore worth considering offering a down payment that exceeds the lender’s minimum requirement.
Which lenders offer bankruptcy mortgages?
On the UK High Street, the list of lenders that specialise in bankruptcy mortgages is relatively short. In fact, any evidence of bankruptcy whatsoever is likely to count you out of the running with the vast majority of mainstream lenders.
This is why it is important to set your sights beyond the usual high-street names if you are looking to get a good deal with a history of bankruptcy. With the help of an established independent broker, your requirements and financial position can be paired with an innovative and accommodating lender who specialises in post-bankruptcy mortgages.
By working with an independent specialist, you are far more likely to both qualify and be offered a competitive deal you can afford. Particularly if you are otherwise in a strong and consistent financial position, your history of bankruptcy may not be held against you.
Speak to an independent broker to arrange a whole-market mortgage comparison, including the specialist lenders you won’t find on any UK high street.
Let-to-Buy: How to Assess Affordability
Let-to-buy can be a fantastic option where selling your home the conventional way is impossible or not preferable. For an overview of borrowing costs and typical let-to-buy rates, use our helpful let-to-buy calculator.
How does let-to-buy work?
Let-to-buy bears many similarities to a classic buy-to-let investment opportunity. With let-to-buy, the whole process works in reverse.
Many homeowners, upon finding their dream property, encounter difficulties selling their current home. In other instances, those who have spent years or decades investing heavily in their current home would rather hang onto it than sell it.
In both instances, let-to-buy could be the ideal option. This is where you retain ownership of your current property, let it out to tenants, and use the rental payments to cover your current mortgage. You are then free to take out a new mortgage on the property you intend to buy, leaving you with just one mortgage to pay from your own income.
Your tenants effectively pay your previous mortgage, and you ultimately end up with the two homes under your ownership.
Switching mortgages
Let-to-buy can be flexible and affordable, though it is not without its complexities. Letting out a property under the terms of a standard mortgage usually goes against most lenders’ terms and conditions.
It is therefore necessary to switch the mortgage on your current home to a specialist buy-to-let mortgage, as you will subsequently be letting the property out to tenants rather than living in it. This may also mean a higher APR than the prior conventional mortgage, along with additional borrowing costs applicable to buy-to-let mortgages.
This is one of many reasons why comparing the market in its entirety for a competitive deal is essential. After gaining a basic overview of what is on offer with our let-to-buy calculator, call to arrange an obligation-free consultation.
Establishing affordability
All applicable costs of a let-to-buy need to be carefully considered before applying for a new mortgage or buying a second home.
For example, owning a second property may increase stamp duty liability. Rental income tax is also payable on the money earned by letting out a property.
In addition, becoming a landlord means taking responsibility for the upkeep and maintenance of two homes. Mortgage arrangement fees, legal fees, valuation fees, and completion fees may also apply. all of which should be discussed with a broker before applying. You can even use our UK mortgage calculator to work out all the costs.
Let-to-buy is therefore not an ideal solution for all homeowners but can prove a profitable venture for many.
Independent broker support
If you have any questions about the let-to-buy process or are considering investing in a second home, we can help. Book your obligation-free, cost-free consultation with one of our experts to discuss the options available.
We will help you assess affordability, eligibility, and whether letting go is the right move for you. Call or email anytime to learn more.
Top-Pick Property Hotspots for 2021: Where Have House Prices Risen the Most?
To say that 2020 has been quite an unusual year for the UK property market would be a major understatement. With the fallout of the COVID-19 crisis expected to linger for some time, real estate experts are predicting similarly turbulent conditions throughout much of 2021.
Uncertainty and economic turmoil have, however, had little impact on the appeal of some of the UK’s most desirable places to live. Looking ahead into 2021 and beyond, there are several towns and cities where property prices are predicted to continue accelerating wildly.
The most lucrative places to live or own
According to the latest figures published by Ocean Finance, house price growth over the past two decades in some of England’s key towns and cities has been astonishing.
Right at the top of the table comes Manchester, with a whopping 143% average property price increase since 2000. This means that a property purchased for around £74,000 20 years ago would now be worth almost £180,000—an enormous profit for those who invested at the right time.
Leicester followed in a close second position, having achieved an impressive 132% average property price growth in two decades. Those who bought in 2000 and sold in 2021 could be looking at average profits in the region of £155,000.
Bristol came in third, achieving 122% average property price growth from £137,742 to £291,839. That’s a huge profit of more than £150,000 on the table for those who sell in 2021.
Unsurprisingly, the vast majority of people who purchased properties in London 20 years ago could make an absolutely enormous profit by selling now. On average, a £360,000 property in London would sell for approximately £785,000 today—an increase of 116%.
Surprisingly, strong performance was noted in Kingston-Upon-Hull, where average property prices have increased by 112% over the past 20 years. In monetary terms, this amounts to an average profit of around £60,000 for those who purchased two decades ago and intend to sell on today’s market.
Cambridge didn’t trail too far behind with its own 101% average house price increase over the same two-decade period. Average house prices in Cambridge have risen from £224,000 to an astonishing £450,000, amounting to a generous profit of around £226,000.
Property prices in Brighton have also increased exponentially over the years; today’s average asking price is around £372,000, compared to just £187,000 20 years ago.
Homeowners in Derby who purchased properties in 2000 would have been looking at an average cost of just under £83,000—their homes are subsequently worth an average of £162,000 today, an average increase of 96%.
Last but not least, Coventry has performed similarly well since 2000, having achieved an average property price increase of 95%. This means that a £97,000 property picked up 20 years ago would now sell for around £190,000, pocketing you an impressive profit in the process!