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Is Covid-19 really impacting demand for property?

Alpa Bhakta, CEO of Butterfield Mortgages, looks at the prime central London property market where transactions made a strong start to the year but that has now changed. It’s difficult to predict the future but Alpa remains positive.

When Covid-19 lockdown measures were first introduced in March, businesses large and small were forced to change the way they operated, the services they provided and the manner in which they engaged with clients.

Now, over a month since these lockdown measures were first introduced, it seems as though organisations have, for the most part, adapted to this new climate.

For real estate, social distancing regulations have forced construction sites to temporarily close, compelled sellers to take their property off the market and brought the majority of existing transactions to a standstill.

House prices

Should the UK remain in a state of lockdown for the coming months, there are fears that the rate of house price growth could drop significantly. Cebr recently announced that house prices in the UK will fall by 13% by the end of 2020 as a consequence of Covid-19.

Of course, there is a natural propensity for forecasts to take into account worst case scenarios. We received similar projections in the lead-up to the 2016 EU referendum. One month before the vote took place, HMRC warned that house prices would drop by at least 10% should the UK vote for Brexit, and as much as 20% two years following the vote.

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Evidently, this proved not to be the case, showing why we should be critical when assessing how certain future events will affect demand for real estate. This is also true when we consider how different sectors of the market are performing, like prime central London (PCL) property.

Strong start to 2020

The PCL market was in a strong position at the beginning of 2020. Knight Frank recorded more transactions in prime central London property in the two weeks following the election than it had witnessed since December 2016. As a result, it anticipated a significant rise in PCL transaction activity over the course of 2020.

Covid-19 has now brought many of these early projections into question. Transactional activity has slowed, but this is not due to a lack of demand.

In reality, prospective buyers are simply not in a position to act on their investment intentions due to the obstacles posed by the pandemic. In this sense, the rate of PCL house price growth is likely to slow, as should be expected given the current circumstances.

The question, and bigger fear, is whether Covid-19 will have a long-lasting impact on demand for real estate. Will investors be deterred from UK real estate or will they simply continue to act with the same enthusiasm displayed at the beginning of the year?

Optimistic future

There is good reason to be optimistic about the future. If Brexit has taught us anything, investors will only act confidently once certainty has returned to the market. Boris Johnson’s victory in the 2019 general election was this breakthrough moment previously, and I am confident a similar event will trigger a second surge of investment activity across the wider property market.

This view is shared by global real estate provider Savills. Having reviewed its five-year projections, it remains confident that average UK property prices will increase 15% by 2024 even with the uncertainty surrounding Covid-19. This is an impressive rate of growth, even if it reflects residential real estate instead of just PCL market.

The situation regarding Covid-19 is constantly changing and there is still no indication of when the current lockdown measures will be lifted.

At this moment, it is difficult to make any bold predictions about the future, but we should not let negative speculations overshadow the positive performance the PCL market displayed at the beginning of the year.

Once Covid-19 has been contained and lockdown measures rolled back, I anticipate an increase in property transactions taking place.

Source: Mortgage Finance Gazette

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Kensington relaunches residential and buy-to-let products

Kensington Mortgages has resumed lending across its residential and buy-to-let ranges up to 75% LTV.

On Kensington’s Select range, rates start from 4.29% for a two-year fix and 4.49% for a five-year fix rate. The Select range will have a maximum loan amount of £750,000 and £500,000 for Core, Right to Buy and buy-to-let products.

Kensington Mortgages has also launched a non-physical valuation solution for digital valuations. The new software programme will apply to all residential new purchase and remortgage cases, as well as buy-to-let remortgages.

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Craig McKinlay, new business director at Kensington Mortgages, said: “This is an unprecedented time for everyone – customers, lenders and the industry alike – and we’ve been working hard to reintroduce our 75% LTV range. We want to help our brokers and customers as best as we can during this time and still provide accessible funding options.

“We have experienced an industry-wide challenge obtaining physical valuations and have been working had to produce our non-physical valuation solution, which we are pleased to now have in place too. We are constantly reviewing our market position to keep up to date with official guidance and industry best practice in these exceptional times.”


Source: Financial Reporter

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House price growth rose by 3.7% in April

Annual house price growth rose to 3.7% in April 2020, up from 3% in March, Nationwide’s House Price Index has found.

Monthly prices rose by 0.7% to £222,915, as Nationwide said the impact of the pandemic is not fully captured by the data.

Robert Gardner, Nationwide’s chief economist, said: “In the opening months of 2020, before the pandemic struck the UK, the housing market had been steadily gathering momentum. Activity levels and price growth were edging up thanks to continued robust labour market conditions, low borrowing costs and a more stable political backdrop following the general election.

“But housing market activity is now grinding to a halt as a result of the measures implemented to control the spread of the virus, and where the government has recommended not entering into housing transactions during this period.”

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He added: “The medium-term outlook for the housing market is also highly uncertain, where much will depend on the performance of the wider economy.

“Economic activity is set to contract significantly in the near term as a direct result of the necessary measures adopted to suppress the spread of the virus.

“But the raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy.

“These same measures should also help ensure the impact on the housing market will ultimately be much less than would normally be associated with an economic shock of this magnitude.”

Tomer Aboody, director of property lender MT Finance, said: “Nationwide portrays a confident housing market with the fastest rate of growth in prices since February 2017. Of course, lockdown will affect sales and prices, but that is the reason – people are locked down, surveyors cannot value properties and would-be buyers can’t view them.

“There is still huge demand for property and buyers are confident about the market, which wasn’t the case in 2008. Then, the financial system was devastated; this time, lending isn’t an issue and banks remain keen to lend.

“There will be the inevitable slowdown of transactions but once lockdown has been lifted, huge pent-up demand which should take the marker back up.”

Miles Robinson, Head of Mortgages at online mortgage broker Trussle, said: “The Land Registry data released this week shows that property sales collapsed by 40% during March, which is perhaps a more representative picture of how the Coronavirus is beginning to affect the housing market.

“However, we have seen lenders that had previously hiked LTV thresholds at the beginning of lockdown begin to loosen restrictions and, with the COVID-19 exit plan due to be published next week, we could see the market start to shift back into action.”


Source: Property Wire

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Barclays extends mortgage offers to six months

Barclays is giving customers up to six-month extensions on mortgage offers as the government has advised home moves should be delayed in the current climate.

Customers who have a mortgage offer and exchanged but not completed can apply for the extension.

However, the lender will need to be told about any change in circumstances, such as being furloughed, which could impact income.

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The lender is arranging extensions directly with customers rather than through brokers.

To qualify the application must be either a residential or buy-to-let purchase, with the current offer expired after 26 March or due to expire in the next 30 days.

It comes after Barclays announced that more than 238,000 mortgage and loan holidays have been approved for customers.

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Last week the bank relaunched 80 per cent loan to value lending after temporarily withdrawing the products in response to the coronavirus outbreak.

All lenders have confirmed they would extend mortgage offers by three months as the virus put the breaks on the housing market.

Based on average bill sizes for a medium energy user on a dual fuel plan paying by monthly direct debit, and averaged across all regions. This information is updated hourly with energy plans which are available to switch to through Uswitch. To appear in this table, plans must be available in at least 7 of the 14 regions.

Written by: Lana Clements

Source: Your Money

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Specialist lender lifts mortgage restrictions

Specialist lender Hodge has lifted restrictions on its mortgages after announcing interim changes to its lending criteria last month.

The lender has resumed accepting applications for new purchases at a maximum of 60 per cent loan to value, and removed its restriction of only accepting like-for-like remortgages.

It will consider capital raising across the whole of its later life range at up to 60 per cent LTV.

Purchase and remortgage transactions will be based on automated valuations.

Emma Graham, business development director at Hodge, said lifting some of the temporary restrictions across later life products would enable it “to help more customers secure finance at this challenging time.

“Over the coming weeks and months, we will continue to review our position in the market with a view to make additional enhancements to our products and criteria in the near future.”

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Restrictions on physical property valuations and the government’s lockdown have been affecting the industry and a range of lenders have temporarily reduced their maximum LTVs.

Other lenders have also relaunched products that had been withdrawn from the market. Last week Nationwide resumed lending up to 85 per cent to new customers.

Chris Sykes, mortgage consultant at Private Finance, said: “It is really encouraging to see lenders returning to market or lifting restrictions on criteria. Hodge coming back to market with greater flexibility gives older borrowers more opportunities for finance when perhaps they or their families need it most.

“Hodge is not alone in this. We have just seen BM Solutions, a major buy-to-let lender, coming back into the market at 75 per cent LTV (up from 60 per cent) and other lenders like Nationwide and Halifax easing on their LTV restrictions.

“Lenders are adapting to these changing times and perhaps even adapting quicker than we have seen in the past.”

By Chloe Cheung

Source: FT Adviser

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Rise in mortgage products ’cause for optimism’

The number of mortgage products grew by 5.9 per cent in the past week in a sign the market is starting to recuperate, according to technology provider Mortgage Brain.

The number of products available last week stood at 8,044, marking the second consecutive week the number had risen, and up by 488 from the previous week.

The increase was mostly due to the remortgage sector, where product numbers went up by 5.4 per cent, while home mover products increased by 2 per cent, and buy-to-let products fell by 1.9 per cent.

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When compared to pre-pandemic levels, the number of mortgage products is still 6,630 – or 45 per cent – lower than the nine week average to March 16, however.

According to Mortgage Brain the latest increase in numbers reflected lenders returning to the market, increasing their LTVs and relaxing some of their criteria.

Last week Nationwide resumed lending up to 85 per cent to new customers. Specialist lender Hodge followed and lifted restrictions on its mortgages, after announcing interim changes to its lending criteria last month.

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Mark Lofthouse, CEO of Mortgage Brain, said the rise in product numbers in the past two weeks was “cause for cautious optimism”.

Describing the recent figures as “encouraging”, Mr Lofthouse added that “we could be at the end of the dramatic week on week reductions”.

Kevin Dunn, director at Furnley House, added: “Last week we thankfully saw the return to the market of some higher loan to value deals from some of the bigger lenders. Hopefully this will have a ripple effect to give other lenders the confidence to return more products to the market too.

“A higher increase in remortgage products makes sense, as often these are easier to complete without having to have a physical valuation.

“There are definitely some green shoots to suggest the market is slowly coming back.”

By Chloe Cheung

Source: FT Adviser

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Accord Buy to Let expands 60-65% LTV range and reduces rates

Intermediary-only lender Accord Buy to Let is adding 13 products at 60-65% loan to value ratio (LTV) with 2 or 3-year fixed term options.

The products being introduced include: a 2-year fixed rate at 60% LTV of 1.96%, with no product fee, free valuation and either £250 cashback or free standard legal services; a 2-year fixed rate at 65% LTV of 1.87%, with a £950 product fee, free valuation and either £250 cashback or free standard legal services; a 3-year fixed rate at 65% LTV of 2.05%, with a £950 product fee and free valuation.

In addition, Accord Buy to let is reducing rates on more than half of its existing range of products.

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For example, a 5-year fixed rate at 60% LTV is now 2.02% (previously 2.09%) and a 5-year fixed rate at 65% LTV is now 2.21% (previously 2.23%); both products come with no product fee, free valuation and either £250 cashback or free standard legal services.

A 2-year fixed rate at 60% LTV is now 1.60% (previously 1.62%), with a £950 product fee, free valuation and either £250 cashback or free standard legal services.

Simon Garner, product manager at Accord Buy To Let, said: “These are difficult times for all and so we’ve reviewed our product range and looked at where we can offer better options to landlords wanting fixed-rate shorter terms whilst they wait to see how the market adjusts.”

By Jessica Bird

Source: Mortgage Introducer

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Do you need mortgage protection insurance?

Your mortgage is likely to be one of the biggest expenses you need to have every month. Even if you were not able to work because of a disease or redundancy, those repayments still must be made, or you may face the risk of losing your home. You can choose from two primary possibilities to protect yourself: you can turn to general income protection insurance (meaning the payments you would get could be spent on anything) or use protection insurance, designed particularly to cover the mortgage payments. People tend to choose the second option often because it is explicitly designed to solve this problem. MPPI, which stands for mortgage payment protection insurance, makes it possible for you to keep on paying off your mortgage, even if you stopped getting a stable income.

Types of MPPI

There are three main types of mortgage payment protection insurance. The difference between them is the range of situations where you will get financial help:

  • Accident and sickness only,
  • Unemployment only,
  • Accident, illness, and unemployment.

The cost of mortgage payment protection insurance

The price of MPPI is not always the same – it may differ accordingly to your age and the level of your mortgage repayments. Apart from that, the number of life circumstances that enable you to get financial help also affects the cost. Therefore, accident and sickness-only or unemployment-only policies are less expensive than the variant that covers both of them.

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What is more, your job or the type of employment contract you have can be significant as well. Most insurers classify professions in different risk categories. For instance, it may look like this:

Class 1 – Professionals, administrative staff, managers, secretaries, IT specialists, etc.

Class 2 – Skilled manual workers, shop assistants, florists, etc.

Class 3 – Semi-skilled workers, care workers, teachers, plumbers, etc.

Class 4 – Heavy manual workers, builders, mechanics, etc.

What is more, most insurance companies cater to self-employed people as well. Still, you should always read the small print carefully in order to make sure you are not excluded because of, for instance, being on a fixed-term or casual contract.

Where to get mortgage payment protection insurance

Firstly, you can be provided with MPPI by a mortgage lender, as most of them offer it along with your mortgage application. It is a convenient solution because, in this way, you will cover your premium as an element of your regular mortgage payment. Nonetheless, it is advisable to always shop around for a policy. You need to keep in mind that buying policy via your lender means that you will be under their group policy. For this reason, further switching to your mortgage can be restricted.

The second option is to cooperate with a mortgage broker to arrange the best insurance for you. They are experienced in comparing numerous policies from many different companies to make sure that you will be provided with the best possible option. What is more, before you make your final decision, they will comprehensively explain to you what the differences in each possibility are.

Another solution that you can choose is to use an existing life insurance policy for mortgage protection. It is possible as long as the amount you are insured for is equal or higher than the value of your mortgage. Moreover, it needs to run for the same term. However, you need to remember that it means you are assigning the policy to your lender. As a result, if you die during the term, the life insurance benefits will be given to your lender to pay off the mortgage. If there are any policy benefits left over after that, your dependants will receive them. However, if the whole sum needs to be used to cover the mortgage, your dependants will get no money.

Topping up your mortgage

If it happens that you want to top up your mortgage, you always have to check if your policy is appropriate for its new value. It is possible for you to find a new policy that will cover the whole amount of your mortgage. Apart from that, you can get other insurance that will be associated just with the added amount.

Both of these options should be compared carefully. Sometimes it can be more beneficial to keep your primary mortgage payment protection insurance and then provide yourself with a second one for the top-up value. You should find out what is the cost of resigning from your primary policy and getting a plan for the full value of your new mortgage instead.

When you are getting a new policy, you may be surprised that the premium is higher than the last time you checked. The reason for this is that you are getting older, and age is one of the main factors that affect the premium. But the good news is that if you quit smoking, or if the rates have lowered since the last time you tried to get the cover, it may be possible for you to pay less.

All in all, to make your financial situation better protected, you really should invest in mortgage payment protection insurance. At the same time, it is advisable not to rush in choosing it and familiarise yourself with all the options, or ask a professional broker to help you to make the right decision.


Source: London Loves Business

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85% of buy-to-let lenders still lending

Some 42 of the 49 buy-to-let lenders operating at the beginning of March are still lending despite the impact of coronavirus, analysis from Mortgages for Business shows.

Together Money and Vida Homeloans have both pulled out of the market, while HSBC is no longer accepting buy-to-let applications.

However Santander, Clydesdale, Precise Mortgages and Kent Reliance have now restarted lending, after initially taking a step back.

Shawbrook and Paragon meanwhile are using virtual valuations against standard properties up to 75% loan-to-value.

Steve Olejnik, managing director of Mortgages for Business said: “Lenders have cut down the sorts of landlords that they will lend to.

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“They’re pulling product ranges, tighten lending criteria, and increasing margins. But different lenders are derisking against different kinds of landlord borrowers. So, while some lenders are no longer lending to first time landlords, there are still lenders who are.

“My advice to landlords looking to remortgage is act sooner, rather than later. You may have to answer a few more questions when you’re applying for a remortgage that you would have had to last month – but a broker will still be able to find you a deal.”

Saffron Building Society withdrew from the market before the outbreak in March, though the lender has indicated that it will return to the market later in the year.

Lenders that have stopped lending to landlords since include: HSBC; Foundation Home Loans; Together Money; Vida Home Loans; Platform Home Loans; State Bank of India; and Furness Building Society.


Source: Property Wire

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Scottish housing market poised for ‘two waves of bounceback’

Scottish housing market is poised for two waves of bounceback with the expectation of a return to pre-coronavirus levels, a leading industry figure has predicted.

The sector has been rocked by stay-at-home and physical distancing measures for agents, surveyors and prospective buyers, combined with a backlog in applications via the Land Register of Scotland service.

However, Paul Denton, the chief executive of the Scottish Building Society, which was established in 1848, said he was starting to see some signs that buyers were looking to life beyond the Covid-19 peak.

“We are still open for business, with our primary focus the health and welfare of our staff and our customers, ensuring we support them financially and emotionally through this time of crisis,” he said.

“We are starting to see signs that buyers are now thinking about life after the Covid-19 peak, with a rise in enquiries on purchase mortgages. And, indeed, our staff are busy processing remortgages, even for those on a mortgage holiday.”

Denton, who represents Scotland on UK Finance’s mortgages board, added: “I think there will be two waves of bounceback. The first, when Registers of Scotland fully reopens and starts clearing the backlog of applications from solicitors. And the second when social isolation measures ease and consumer confidence starts to grow.

“It is clear that the drop in sales volume is driven by social isolation and not a lack of demand from customers.”

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New figures show that the average price of a property in Scotland in February was £150,524 – a year-on-year increase of 2.5 per cent, according to statistics from the UK House Price Index. The UK average house price was £230,332 – up 1.1 per cent.

The largest decrease was recorded in the City of Aberdeen, where the average price fell by 3.6 per cent to £143,990. The highest-priced area was the City of Edinburgh, where the average price of a house is £270,864.

Denton added: “These statistics pre-date Covid-19 but reinforce the trend of Scottish house prices rising faster than the rest of the UK as demand outstrips supply. However, there are marked geographical differences too, with the challenges in the oil and gas sector impacting the Aberdeen market.

“Scotland weathered the storm during the 2008 financial crisis. We know this is on a different scale, but the underlying market is resilient and that latent customer demand will see the market bounce back to something near the levels we saw at the beginning of the year.”

By Scott Reid

Source: Edinburgh News