Participants in the UK housing and mortgage market, while fully focused on the here and now, typically have one eye on what the future might bring.
That focus on the months ahead is inevitable in a market in which activity and, more importantly, completions tend to be (at best) weeks into the future, and where many are looking at where our ‘next meal’ is coming from.
You won’t need me to tell you that current activity levels are extremely strong – Start has had a record summer, and I suspect many other practitioners have enjoyed a similar experience.
But that won’t stop us carefully assessing what’s next, and it also doesn’t necessarily answer those understandable questions around what the rest of the year will bring, and what is coming over the horizon in 2021.
The realists will be questioning whether the activity we have now is sustainable, and why for instance, we are not yet seeing the impact of the macro-economic threats to our market. Can our record business levels possibly continue, when the majority of retailers are making large scale redundancies? When no COVID-19 vaccine yet exists? When furloughing is coming to an end?
Is this currently a housing market ‘bubble’, fuelled by acute pent-up demand, the stamp duty holiday, and an elongated post-lockdown urge to move home, grab more living and outdoor space, and adopt our changing working conditions?
For what it’s worth, I see even greater levels of mortgage activity through the rest of this year and a particularly busy first quarter of 2021, but clearly, after next March, there remains much more uncertainty, given the likely end of stimulus,
One of the major underlying drivers of market sustainability is whether property supply can match the demand, again not necessarily in the short-term of 2020, and early 2021, but further into the future.
Legal & General Mortgage Club research recently suggested that, while one in four people plan to buy a home in 2020 with a further 28% considering it, only 4% of homeowners are currently looking to sell.
As MD, Kevin Roberts was recently telling me, “Mismatch between buyers and sellers has the potential to dry up UK housing stock, making it harder for homebuyers to find a new place to call home.”
While everyone accepts that balancing supply and demand is crucial, I am encouraged by current house price levels which tend to be a determining factor in terms of sellers bringing the property to market. During lockdown, many commentators and indeed Government departments, suggested that a fall in house prices would not just be inevitable but likely to be severe, and I’m pleased to see that recent indices show this has simply not been the case.
As long as prices remain relatively strong, we will see vendors willing to put homes on the market – that looks a greater likelihood in the months ahead, even if we remain cautious about sustainability at this time next year.
We should split the next 12 months into two equal chunks – a more predictable six months ahead, with a little less certainty post-March 2021. From what I gather, even with the COVID-19 lockdown, many lenders are anticipating they will comfortably hit their lending targets in 2020, with an expectation that 2021 may look more like 2019 in terms of volumes – a little down on 2020. And that would be an excellent result given what we have been through, and what we may still have to endure in terms of future local lockdowns and disruption.
This therefore remains a time to make the most of the current market opportunities and, dare I say it, to make hay while the sun continues to shine. We cannot be certain of what will unfold over the next 12 to 18 months, but for those who can plan and prepare, and take advantage of what currently presents itself, there should be plenty of business (and income) to secure. Brokers should expect to have a very busy January to March, in my opinion.
Rob Clifford is Chief Executive of Stonebridge
Jargon Buster
When you are applying for a mortgage it can be hard to understand all the terminology and abbreviations. Here is a guide to some of the more common words you will come across.
Provided to you by a lender, confirming ‘in principle’ what they will allow you to borrow. This can be provided to agents and sellers to show that you can afford their property.
APR means the Annual Percentage Rate and APRC is the Annual Percentage Rate of Charge. These are both used to compare the overall cost of a mortgage. APR compares the cost of the mortgage for the initial fixed period (for example, the first two or five years) whereas the APRC is the overall cost of the mortgage should you pay it for the full term of the mortgage period (for example, 25 year term). A broker would use these to recommend the most appropriate mortgage, based on the initial term and the overall term and make their recommendation based on this information.
Automated Valuation Model, also known as a desktop valuation. The lender instructs their preferred surveyors to confirm the value of the property without the need to physically go to the property. Surveyors will base their valuation on recent sales and other recent valuations. You will not receive a copy of the valuation if an AVM is carried out.
Lenders will often charge an arrangement fee to set up your mortgage. You can choose to pay this up front or add the arrangement fee to the mortgage. If you choose to add the fee you will pay interest on the fee over the term of the mortgage. Your broker will compare products with and without fees and recommend a deal for you.
If you do not pay your mortgage on the date that has been agreed each month, you will fall into mortgage arrears. Should you not be able to pay your mortgage for any reason, contact the lender immediately to discuss your circumstances.