Travel chaos has disrupted many peoples plans to get away for a holiday this summer but Chancellor Rishi Sunak’s Stamp Duty Holiday has really taken off!
It’s been a busy summer. Volumes of enquiries, offers being accepted and ultimately completions have been high since June. Many people have been moving out of the city and into more peaceful surroundings and we feel this may have been instigated by happenings earlier in the year and how it made us all take note of our surroundings and lifestyle. The stamp duty holiday has really fueled the flames and the market has been exceptionally busy. It’ll be interesting to see whether the Government withdraws this holiday as planned at the end of march, or whether they extend it further into next summer.
The residential mortgage market has really been split into two parts. Those with lots of deposit and those without.
Let’s look at those with lots of deposit first. Lenders are falling over themselves to lend if you have a large deposit. There really is appetite out there to lend to people who have a large amount of equity in their home or a large deposit to put down. When I say a large deposit I am thinking of over 25%. If of course you have over a 40% deposit it is possible to access some outstandingly low rates at present.
We recently however came into difficulty with loan to income ratios. This is essentially what a lender is prepared to lend based on a multiple of income. For relatively high earning clients we did have lenders who could go over 5 times income however this is no longer available. The best we are currently looking at is around 5 times income with some highstreet lenders limiting this even further to 4.49. Additional pay such as bonus’s, commission, allowances may or may not be taken into account depending on the current lending policy of an individual lender. They have needed to look at the stability of using this income during a pandemic.
So what’s the situation if you have a smaller deposit?
Sorry but it’s tough out there. If you have a 15% deposit or more then it should generally be possible to borrow. Rates do increase quite sharply at this loan to value and credit score & bank account conduct are looked into in detail. If you have less than 10% deposit don’t even think about it. There just aren’t any products out there at present. Some lenders are still able to state they are lending at 95% by using parental savings to secure the borrowing against, so if you have parents who don’t mind tying up money for a number of years then this could be an option, however pure 95% borrowing just isn’t about.
The issue we have is the 90% mortgage market. Lenders are trying to lend in this bracket however as soon as they release a product they are inundated with applications. We are therefore seeing 1 or 2 day ‘sales’ in which a lender releases a 90% product for a day or so and then quickly withdraws it again. To access these products we have to be quick off the mark. Fact find interview completed, supporting paperwork at the ready, property found. We can then pounce on these rates as soon as they are released. It can be stressful!