It’s 2021, people! We have not one, but three, new vaccines going into people’s arms, a Brexit deal (of sorts) and a new US president. We have some optimistic views on the mortgage market, despite a stamp duty hurdle to clear, and lenders who are starting to look at life beyond Covid-19.
High-LTV mortgages are back, bonus payments are starting to be considered again and the worries around the Mortgage Payment Deferral Scheme have not materialised as lenders feared.
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 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. I intend to stay in a pub for a week and you are all invited…
It is hard to believe that January has already passed in a flash. Before you know it, spring will be sprung and the stamp duty deadline will be a distant memory.
Although, for many, Lockdown 3 is the hardest one yet, there is much to be optimistic about as the days start to get longer. Whether the various strains of this ghastly virus start to ruin our plans once more is something that we should probably put to the back of our mind.
I’m also feeling happy about the state of lender/broker relationships and, to quote our beloved Ami chief executive, Robert Sinclair, the next couple of years could well turn out to be a “Golden Age” for lender/broker partnerships.
At times like this we get to dissect our partnerships and relationships generally, from who we want to be in the trenches with to who we want to go forward with; and coming out of this we know that, if the product provider and the distributor remain close, things tend to work better.
We will need to be strong together to get through the next couple of months with the stamp duty holiday deadline nearing and the inevitable deluge of calls and stress. Although there is mounting pressure, I very much doubt we will see a general extension of the holiday because extending the date to another does nothing more than move the problem further along the road.
I do, however, believe there is every chance that the chancellor will introduce some kind of taper to relieve the pressure of a cliff edge. This can be done by letting all those who have exchanged or have a mortgage offer dated before 31 March still benefit as long as they complete within a reasonable timeframe.
The former seems likely and will help remove some of the stress and the potential for both angst and legal action as reports suggest that some 100,000 people are likely to miss out.
Once this is out of the way, there should be a cross-party review into stamp duty to look at whether any of the talked-about replacements for it are realistically workable. This should involve expert stakeholders to help evaluate the options and their consequences.
As far as a general property levy is concerned, replacing both council tax and stamp duty as an annual payment, this has also divided opinion. On one hand it is simple to understand, but on the other it will involve a fundamental revaluation of the country’s property stock, which could leave many people with bills they cannot realistically afford. Although it could work in conjunction with some form of means testing, it could cause just as many problems as it solved.
Selling it to the Tory hard-line base may be tricky, although the so-called Red Wall may well feel happier.
According to HMRC, property transactions in December reached fever pitch as people rushed to beat the stamp duty deadline. The increase of nearly a third on the previous year 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. With 2020 ending with around one million transactions, it looks like 2021 overall will be similar, if not even slightly higher.
Nationwide’s House Price Index report showed a slight fall in house prices that may be the first sign of a softening from the extraordinary figures of last year.
As buyers start to look beyond the end of the stamp duty holiday, we are likely to see a calming of the market over the first half of the year. However, I expect this to be a short-lived pause rather than a fundamental price drop as things start to improve again in the second half of the year and into 2022.
There is still a fundamental shortage of available property for a growing population as well as pent-up demand from first-time buyers and the self-employed who have struggled to obtain a mortgage due to the pandemic. These buyers will return to the market as lenders start to ease their Covid-related criteria.
Although we may get a slight breather after 31 March, the rest of the year looks like it will be a busy time, with many believing that overall mortgage lending will have its highest year since 2007.
Overall, I expect property prices to be rather benign this year with regional variations, and a house price growth ratio between -2 per cent and 2 per cent.
In terms of interesting reports out recently, there have been a few that I recommend. Vida Homeloans’ Generation Rent report and Twenty7Tec’s Future Demands offering are particularly revealing with some great insight. Likewise, if you have not read the latest Ami Connect and Brexit factsheet, why not?
Our first look at the money markets this year shows that three-month Libor is frozen at 0.04 per cent, while swap rates have increased slightly with one-year rates turning negative! Since the last column:
- 2-year money is up 0.04% at 0.12%
- 3-year money is up 0.04% at 0.18%
- 5-year money is up 0.06% at 0.30%
- 10-year money is up 0.12% at 0.57%
The good news on lenders is that they are beginning to think about life after the stamp duty holiday and to start the long road back to normality. There is no mortgage price war yet, but this could change in the second and third quarters as lenders still have a lot of money to lend and will want to make the most of the pent-up demand from FTBs and those needing higher LTVs.
This is where much of the forward-looking focus is now: making sure that we get back to a functional, sustainable mortgage market after 31 March.
We are all delighted to see a host of lenders back in 90 per cent lending and improving choice again. Halifax, for example, has opened 90 per cent mortgages to homemovers once more rather than just FTBs.
It is also good that the rates on higher-LTV products are already starting to fall, pointing to a competitive mortgage market to come. In fact, product choice is breaking out all over, with too many to mention here.
It just remains for me to thank lenders and especially BDMs on behalf of all brokers. We are your partners and will be here when you need us. Just do not forget us and never be a friend at the front door and a wolf at the back.
To all of you — stay safe, stay healthy and stay positive, talk if you need to, and let’s make 2021 prosperous and successful.
Hero to Zero
2021 – A shining light for us all
Lenders that have relaxed rules over local authority indemnity insurance to help with the stamp duty deadline
TSB – offering up to two months’ repayment holidays for customers impacted by recent flooding
The cladding debacle – the government needs to get a grip
FSCS fees increasing for brokers – this is an outrage
Lockdown 3 – please stay safe
What Really Grinds My Gears?
I shan’t apologise for repeating this but we must look after our mental health as an industry. I saw various threads on a well-known broker website and some conversations were concerning.
The broker’s life is hard sometimes; many work alone, especially now, and hours spent on hold to lenders, unexplainable valuations and dealing with their clients’ stress can get too much.
We need an outlet for this — for people to talk, to feel able to express their frustrations in a constructive way, to feel they are heard and, ultimately, to feel better.
It bothers me that I can’t solve this issue, but I’m hoping someone reading this can, or we can as a collective, as leaders of firms or networks. We need to listen. We need to say ‘I am here.’
I have booked a day off on 19 February because I need it. Between 11am and 1pm that day my phone will be on for anyone who wants a chat. About anything. I am here.