Update 1st April 2020:
Whilst we are monitoring the market changes on a regular basis and will update this blog if new information emerges, it’s crucial to point out that this information is as accurate as far as we are aware when writing this blog, but do bear in mind that information is changing on a daily basis and whilst you should use this as a guide in helping you understand the market and a lenders position, you should always check with them directly to understand their full position.
What is happening in the property world?
On Thu 26th March we asked one of our in-house financial advisors to summarise his expert opinion on what is happening in the property market right now and how this might impact how we do things in the future.
It is not unsurprising that the UK mortgage market is slowing down with large surveyors no longer being able to access properties or in some cases closing down completely. The Royal Institute of Chartered Surveyors (RICS) Regulated Member has concluded that there is material uncertainty, it is suggested that the following form of words can be used for future surveys:
The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health Organisation as a “Global Pandemic” on 11 March 2020, has impacted global financial markets. Travel restrictions have been implemented by many countries.
Market activity is being impacted in many sectors. As at the valuation date, we consider that we can attach less weight to previous market evidence for comparison purposes, to inform opinions of value. Indeed, the current response to COVID-19 means that we are faced with an unprecedented set of circumstances on which to base a judgment.
Our valuation(s) is/are therefore reported on the basis of ‘material valuation uncertainty’ as per VPS 3 and VPGA 10 of the RICS Red Book Global. Consequently, less certainty – and a higher degree of caution – should be attached to our valuation than would normally be the case. Given the unknown future impact that COVID-19 might have on the real estate market, we recommend that you keep the valuation of [this property] under frequent review.
As a result, some lenders have chosen to exit the buy-to-let mortgage market altogether for the foreseeable future: Saffron Building Society, which offered a range of mortgages including for portfolio and limited company landlords, currently has no products available saying only that its product range is under review, with Melton Mowbray Building Society and Vida following suit. Together Money has suspended lending in both the buy-to-let and residential market. Barclays has withdrawn all its products for portfolio landlords. The majority of lenders have now issued a statement that they will only focus on existing clients or new business under 60% LTV.
For those that remain, the lending criteria are being tightened: In recent times some lenders have been prepared to lend up to 85 percent of the value of a buy-to-let property with Kensington Mortgages reducing its maximum loan to value lending criteria down from 85 percent to 75 percent.
I understand whilst some landlords are expecting with a lower Bank of England base rate it will lead to lower mortgage rates this is not always proving to be the case. “Lenders concerned about the increased risk of tenants defaulting on rents and falling property prices may well choose to widen their margins and increase the cost of borrowing. Some lenders have increased rates despite the 0.65 percent fall in base rate where margins, as a result, have increased by about 1 percent.” It is likely that rates will see an increase until the market settles, and natural competition takes over.
This is new territory for many lenders, and it is unknown how long it may last for, which is why some lenders are trying to attract clients now rather than try to compete later. E.g. HSBC is offering a two-year tracker loan which charges 0.64pc above the Bank Rate of 0.1pc.
So, what can be done for those who cannot raise funds through re-mortgaging but are worried about tenants being able to pay?
It took a couple of days, but the government finally confirmed last week that the three month payment holiday would be extended to landlords paying buy-to-let mortgages under the same conditions and via the same application process with their lender. The intention is that the saving will be passed on to tenants removing pressure from the private market.
The Lenders in more detail
- In this first document, we list all the BTL mortgage lenders and what help they are offering during COVID 19. Check to see if your lender is on the list and what they are saying with regards to mortgage payment holidays.
- The second document lists residential mortgage lenders and the help they are offering with regards to payment holidays during COVID 19.
- Correct as of 26th March 2020, here is a summary of the changes UK lenders have made with regards to lending criteria. These include both positive and negative changes.
- Here is a list of lenders who are willing to use the Automated Valuation Model (AVM) or do a drive by valuation along with guidance on what their maximum loan amount is, and the loan to value (LTV) percentage they are willing to go to.
We will do our very best to keep this information as up to date as possible and continue to support you during these trying times.
If you need us, please do contact us, and you will still be able to reach us using the usual contact details.