Mortgage lending spikes up as stamp duty holiday extends

Mortgage lending spikes up as stamp duty holiday extends

What happens when something that seems like a faraway dream suddenly becomes accessible?  The instinctive response is usually to grab it! That is what seems to have happened to many interested in the real estate market after the SDLT (Stamp Duty Land Tax) holiday was extended.  The increase in property sales and mortgage lending was noticed across the country, not only for larger houses but also for one and two-bedroom apartments in London and the South East. Estate agents in Sittingbourne will testify to this.

SDLT holiday extension:  The extension till the end of June 2021 for properties up to GBP 500,000 with phasing out programme till the end of September 2021 applicable to properties up to GBP 250,000, not only gives hope to prospective buyers whose applications are still pending but also to new and professional buyers to take advantage of the Stamp Duty Land Tax holiday.

95% mortgage guarantee scheme:  At the same time, the Budget announcing 95% mortgage guarantees, with only a 5% deposit, is an added incentive. The government offers lenders a guarantee to cover a part of the mortgage over 80%, in case of default on repayments.  Of course, the buyer will have to pass a credit rating test to be approved for this.  However, this has seen a spike in mortgage lending.  Many lenders are bringing more such mortgage offers on the market even without the government’s guarantee scheme. Generation Rent to Generation Buy is the goal.

Buy to Let:  For investors looking at buy to let properties (to be rented rather than used as a residence by the owner), the SDLT holiday extension is also applicable, though they will have to pay the usual additional 3% charge on the revised rates. This has encouraged more professional investors to look at mortgages for such properties. There are many mortgage offers for Buy to Let properties, and an experienced estate agent will offer guidance towards the right choice.

Foreign investment:  Another reason for the hike in mortgages is from expats, especially from Hong Kong, who have been keen to move to the UK and settle there, especially after the offer of the British Government to grant entry visas to Hong Kong people with British National (Overseas) status. There has been an increase in sales of homes to such people.  Investment in real estate from foreigners, especially from the Middle East and also other countries, is also growing. With foreign travel restrictions being lifted, it makes it easier for those prospective investors who prefer private onsite viewing of properties rather than virtual viewing to travel to the UK.

Supply against Demand:  The demand has exceeded the supply. The lockdowns saw more people using their residences as offices as well. This resulted in a boom towards larger, more comfortable accommodation with additional outdoor space. Many people moved to the suburbs where this type of accommodation was more easily available. Even with the lockdowns lifted, people have become accustomed to living and working from home, and this trend is likely to continue in part. However, on the other hand, with the Covid vaccination programme running and the reopening of offices, shops, restaurants and public entertainment centres, properties in cities are also seeing a boost in sales. With schools and universities running and international travel resuming, the student rental market is also predicted to rise—also the rental for young professionals who will return to the cities.

Investors looking at making the most of these opportunities are taking advantage of the various mortgage and remortgage offers available.

Competitive mortgage rates:   After many low-interest offers were withdrawn during the pandemic, lenders are now becoming more confident. They are offering competitive mortgage rates, with various perks such as 2 years and 5 years fixed rate 95% mortgages with just 5% deposit.  Interest rates have lowered with the competitive offers. Buyers with higher levels of equity can obtain even lower interest rates.  As the borrowing is increasing, so is the choice for buyers with more mortgage options available.


Conclusion:  With the demand for property in the UK remaining high, it is likely that the mortgage market will also continue to do well. Even though there has been a rise in house prices, real estate is still progressing, and more people are interested in applying for and obtaining mortgages.  True, the supply is not yet up to meeting the demand and the transaction time in progressing applications needs to be improved. However, the opportunities open to a prospective buyer are enormous and the professional advice of the right agent can help in achieving that “unreachable” dream!

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