Mortgage market opportunities for 2021
02 March 2021
02 March 2021
Lea Karasavvas, Managing Director, Prolific Mortgage Finance
Meet Lea Karasavvas, our newest advisory board member, and read his views on what 2021 has to offer.
What a start to 2021! Over 20 million people have received their first jab, as we continue the biggest fight of our generation against COVID-19. However, it seems the jabs are not the only shot in the arm we will receive. By the time you read this the Budget will have been announced. But as I write there is fresh hope that the stamp duty deadline will be extended to the end of June, but in what capacity is yet to be determined. We are seeing many phrases that are now mentioned in every other sentence; “new norm”, “sorry, I was on a video call”; “I was just reaching out” and “when are the golf courses opening?”. However, “kicking the can down the road”, is a phrase that has been mentioned since the furlough scheme first began. There is now a feeling that the stamp duty cliff edge is another can and that Rishi’s size 8s (could be 7s I am taking a guess!) are about to go right through it. Thought needs to be given to a tapering solution here or the late nights, early starts and sheer panic stations us brokers, lenders and solicitors were starting to experience will just resurface again in a few months when potentially another 100,000 transactions could be on their way to Beachy Head.
A boost for first time buyers
With the extension pending, rumours are surfacing that the return of 95% borrowing could be on the horizon, which will be a huge boost for first time buyers. Having disappeared briefly during COVID-19, higher loan to value borrowing was proving a puzzle brokers were unable to solve. But slowly, lenders are returning to the 90% space, and the competition has driven pricing down to a current market leading 3.19%. Competition in price is the borrowers’ best friend, and just as we have seen 90% and 85% borrowing become competitive, we will need as many borrowers as we can at 95% to ensure the pricing is realistically affordable for those that choose to pursue it.
Other positives we have seen come in the shape of cheap funding at the lower loan to value brackets. As I type, TSB lead the way with a jaw dropping 1.19% five year fixed rate. In my 20 years in the mortgage world, I have never seen anything like it. That is practically giving money away. The new seven year fixed rate of 1.49% offered by Barclays for premier clients is also a rate that seems a veritable steal in the current climate. Lenders are driving down the cost of borrowing and has been met by the return of higher income multiples, with some lenders back in the 5.5 times income bracket. The signs of a strong market continue, with lenders showing a real appetite again.
Support still required
However, one conundrum that is yet to be addressed is the underwriting of the self-employed. I do feel for lenders here, as underwriting someone who has furloughed staff, taken a Coronavirus Business Interruption Loan, not traded in three months due to lockdown, but are somehow demonstrating a larger profit down to a false economy, is a nightmare to underwrite. However there needs to be a way of helping these people. A lender think tank on how as a collective we can continue to help the self-employed is clearly required.
The buoyancy of the purchase market looks set to remain for at least another three months. The remortgage market should also remain strong for the low loan to value borrower with huge opportunity in the long-term fixed rates, which are proving very popular for those not entertaining a move in the foreseeable. Lenders are feeling more confident that values may well remain, and higher loan to value products are returning, as too are higher income multiples. As the daffodils and tulips are starting to flower around us, so too are “the green shoots” (another overused phrase, but necessary here) of optimism within the mortgage world. There is a lot of opportunity. With these low rates we can successfully navigate our clients through the undoubted stormy seas that are ahead. Mr Sunak said that he wanted to "level with people" about the "shock to the economy" caused by COVID-19. Tough times may be coming, but with the rates available at present, and income multiples that are returning, acting now could prove our worth us brokers and prove that not all superheroes wear capes!
The value of advice
It is time to make sure that customers really recognise the value of our advice. To help all our clients firmly set budgets that will enable them to navigate through the shock that our economy is suggested to be in. Lenders have given most of us the chance to batten down the hatches, with record low rates. Whilst criteria and underwriting are more complex than ever before, help from industry tech such as KnowledgeBank and Criteria Hub can help us all cover as much of the lenders' criteria as quickly as we can. Tech is needed to get the understanding of the ever-changing COVID-19 criteria of lenders. However, I cannot emphasise enough how the most important aspect of broking right now, is the value of your Business Development Managers. Whilst they are not so much a physical presence right now, they are more than ever, an extension of your business and are working tirelessly to assist us in getting cases over the line.
As an industry, whilst we are perhaps more alone than we have ever been, we have never been more together. Let us brace ourselves for one of the most anticipated budgets of our generation and continue to serve our clients as best we can, as now more than ever, our experience is urgently needed!
This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.