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Mortgage Borrowing At The Highest It Has Ever Been

Mortgage Borrowing At The Highest It Has Ever Been

by | May 21, 2021 | Latest News, Advice, COVID-19

Recent news that mortgage borrowing has reached an all-time high is great news for developers and those looking to sell their homes or other properties. The record high shows that more people are moving home and suggests a shift away from renting towards buying. There are many reasons for this change including the extended stamp duty holiday, but the impact that this will have on the housing market in months to come is still being assessed.
In March 2021, according to the Bank of England, the population borrowed £11.8 billion more on mortgages than they repaid, with a gross mortgage borrowing of £35.6 billion. This has put net borrowing at its monthly highest since the start of recording comparable modern data in 1993. The current low Bank of England interest rates directly resulted in low mortgage rates, making borrowing and mortgages even more popular.

Eighty-three thousand new mortgages were approved in March, which is up from 73,000 mortgage loans approved in February 2020, at the start of the Coronavirus pandemic and first national lockdown, showing an increase in those looking to move home

During this time, the production and manufacturing industries including those focused on building new commercial and residential properties have continued to steadily grow for the eleventh month in a row. This suggests that the new properties looking to go on the market in the coming months are going to be met with huge demand which in turn raises prices.

A Market Boom

Due to the increase in borrowing, property prices are also on the increase, with Nationwide Building Society announcing an average price increase of almost £16,000 for the year ending April. This puts the average house price at nearly £240,000 and is expected to continue rising this year.

Economists believe that the market boom is mainly being fuelled by high-income groups, whose jobs were not affected by the pandemic. This also suggests an increased demand for higher-end homes, more complex and unique builds, or investment properties as this is unlikely to be the first home of someone within this group.

The Stamp Duty Break Extended Until June

The stamp duty holiday, which has been repeatedly extended during the period of the pandemic, continues to see homebuyers rushing to take advantage of it before it expires. The stamp duty holiday was extended until June 30th, 2021, and the buyers demand does not seem to slowing.

The tax rate will increase through July, August, and September, ending on September 30th, 2021. The stamp duty will then return to normal pre-COVID-19 levels on October 1st, 2021. Due to this it is expected that the housing market will slow during these months in comparison which could in turn cause a drop in prices but the long-term impact of this is still being monitored with much debate surround the ‘post covid’ housing market.

If you are looking to complete your build please get in touch with BLG to see how our finance options can help.

Who Is Eligible For Build To Let Development Finance

Who Is Eligible For Build To Let Development Finance

by | May 21, 2021 | Latest News, Advice, COVID-19

Whether you’re a first-time investor or an experienced property developer, delving into the lucrative rental market often requires financial support. The build to let finance option provides a tailored solution for those seeking long-term returns through rental properties.

The build to let development finance is used to fund the project during the build phase. Once the build is completed, the investor or developer will exit onto a standard buy to let product. Where five to ten apartments exist in a building, a single standard buy-to-let mortgage is typically available. When there are more than ten apartments and additional facilities, such as an on-site gym, then a specialist commercial buy to let product will be called for.

To fund the project during the build phase, investors and developers often turn to build to let development finance, transitioning to a standard buy to let product upon completion.

Eligibility

When considering build to let finance, adherence to specific eligibility criteria becomes paramount. Lenders meticulously evaluate various factors to ensure the viability and success of the project. The lending criteria for build to let funding is evidence of a strong exit strategy, which is typically a buy to let mortgage that is agreed in principle. Here’s a detailed exploration of the key eligibility criteria:

Strong Exit Strategy: A fundamental requirement for accessing build to let finance is the demonstration of a robust exit strategy. This often takes the form of a pre-approved buy to let mortgage. This strategic plan outlines how the investor or developer intends to transition from the initial funding phase to a standard buy to let product upon project completion.

Track Record and Experience: Investors and developers with a proven track record in the sector and a history of successful developments enhance their eligibility. Previous experience in navigating the intricacies of property development is a valuable asset, instilling confidence in lenders regarding the project’s potential for success.

Comprehensive Business Plan: The submission of a well-structured business plan is a critical component of eligibility. This plan should go beyond a mere overview, delving into key metrics such as occupancy forecasts and rental projections. A comprehensive business plan not only outlines the project’s financial viability but also showcases the investor or developer’s strategic vision.

Creditworthiness: While good credit is generally preferred, lenders understand that certain circumstances may lead to less-than-perfect credit histories. In such cases, eligibility is still possible, provided the poor credit does not pose a significant threat to the exit strategy. Lenders may assess the overall financial health and stability of the applicant.

Security and Deposit: Offering good security and a deposit higher than the minimum requirement are viewed as indicators of lower risk. A higher deposit showcases the applicant’s commitment and financial stability, strengthening eligibility. Security, in the form of collateral or assets, provides assurance to lenders and mitigates potential risks associated with the financing.

Understanding and fulfilling these eligibility criteria not only increases the likelihood of securing build to let finance but also sets the stage for a successful and sustainable project in the competitive property market. Aspiring investors and developers are encouraged to work closely with financial experts and advisors to navigate the intricacies of the application process and optimise their eligibility for build to let finance.

Strengthening Your Position

There are strategic avenues for those seeking to fortify their eligibility or address capital shortfalls. Here, we delve into alternative options designed to strengthen your financial position:

Bridging Loans: Bridging loans serve as invaluable short-term solutions, especially when some capital is available but falls short of the project’s requirements. These loans provide the flexibility to swiftly acquire a portion of the site, facilitating progress while the investor or developer works towards securing additional funding. Bridging loans act as a financial bridge, enabling seamless movement from one phase of the project to the next.

Equity Release: A strategic approach involves tapping into the equity within your existing investment portfolio. By remortgaging properties, investors and developers can unlock additional funds to bolster their financial capacity. Equity release allows for the efficient utilisation of existing assets to secure the necessary resources for the build to let project. This option leverages the accrued value of your properties, providing a dynamic source of financing.

Unsecured Business Loans: For those seeking a supplementary financial boost of up to £25,000, unsecured business loans present a viable solution. These loans, not backed by specific collateral, offer flexibility and a streamlined application process. While the loan amount may be relatively smaller compared to other financing options, unsecured business loans serve as a convenient top-up, filling gaps in capital and supporting various project-related expenses.

Considering these alternative options allows investors and developers to adapt to the ever-evolving financial landscape of property development. Each avenue offers a distinct set of advantages, catering to specific needs and circumstances. It is crucial to carefully assess your financial requirements, risk tolerance, and overall project goals when determining which alternative option aligns best with your unique situation.

Collaborating with financial experts and advisors is advisable to navigate the nuances of each alternative, ensuring informed decision-making. By strategically utilising bridging loans, equity release, or unsecured business loans, you can fortify your financial position, enhancing your ability to embark on successful build to let projects with confidence and resilience.

Important Considerations

Before embarking on a buy to let project, it’s crucial to be aware of key factors, such as potential challenges in finding buyers, higher interest rates for short-term finance, and the time it might take for rental incomes to materialise.

For tailored advice and information on build to let finance, landlords and property developers are encouraged to reach out to the experienced team at BLG. Their expertise can guide you through the intricacies of financing, ensuring your project’s success in the competitive rental market. For more information on build to let finance for landlords and residential property developers, please contact the BLG team.

Are First Time Buyers Suffering Because Of COVID-19?

Are First Time Buyers Suffering Because Of COVID-19?

by | Apr 23, 2021 | Advice, COVID-19, Latest News

COVID-19 has changed the economic position of individuals and businesses significantly within the UK. First time buyers have not been spared from the financial impact of COVID-19, and this demographic has always come up against major challenges when attempting to get their first foot on the property ladder.

The most significant challenges for first time buyers are well known and include saving enough money for the deposit and earning a high enough salary to attain the necessary mortgage.

The Coronavirus pandemic and the job and wage insecurity it causes have put lenders in a position where they are increasingly cautious about lending, and in particular with first time buyers. 

According to a recent survey conducted by Trussle:

  • 65% of first time buyers say they feel it is impossible to get on the property ladder, with 62% deciding to delay their home-buying efforts and save for a further year.

 

An Increasingly Confusing Housing Market

The changing lending criteria and deposit requirements are leaving the first time buyer confused, also evidenced in the Trussle survey:

  • 76% of first time buyers in the UK say they feel confused, angered, and worried about how COVID-19 has affected their home ownership prospects.

The number of lending products for first time buyers is down. There are now fewer high Loan To Value (LTV) mortgages, and fewer than 4% of mortgage deals with an LTV of over 90%, compared to this time last year.

It is not all bad news because other financial support for first time buyers remains in place. The Help to Buy, Right to Buy/Acquire, and Shared Ownership Schemes are three examples of the financial support available. Furthermore, Chancellor Rishi Sunak once again extended the Stamp Duty Holiday (originally planned to end on March 31st, 2021). The Stamp Duty Holiday will now come to an end in June 2021, with a tapering off period that will run to the end of September and will save home buyers up to £15,000.

However, first time buyers may still need to look further afield in more affordable areas and consider if working from home is a viable long-term option for them before making a purchasing decision.

 

Post COVID Outlook

While property viewings, valuations, and sales continued through the latest bout of lockdown measures, the housing market’s recovery can only be achieved by including the buying power of the first time home buyer.

Property availability continues to be an issue. COVID-19 is adding three to eight months to new residential development build times, delaying the completion of 250,000 homes. However, residential development finance is helping property developers acquire financing and complete projects, which will ultimately improve availability.

For more information on the help available for first time buyers and residential property developers, please contact the BLG team.

How Has COVID-19 Impacted Housing Prices

How Has COVID-19 Impacted Housing Prices

by | Dec 23, 2020 | Latest News, COVID-19

After an initial pause in house sales early in the pandemic, there has since been a small boom over the summer, prior to the current lockdown, which has just ended. However, with the COVID-19 pandemic rumbling on, the completion of Brexit in January, and the government bringing the stamp duty cut to an end in April 2021, we are left wondering if house prices will continue to rise.

At the moment, estate agents across England, Wales, Scotland, and Northern Ireland are continuing with in-person viewings. This means that selling a house and buying a house can take place.

The Stamp Duty Cut

Housing marketing is in full swing with the varying-levels of temporary cuts to stamp duty. The savings depend on the country and the property’s sale price, but you could save up to £15,000 in tax if you complete on your home before April. This means that even if house prices fall slightly between now and then, you should still be in a good position.

However, for the moment, house prices are continuing to rise month on month, according to figures released by The Land Registry’s UK House Price Index.

 

Housing Market Predictions

In response to how the stamp duty cut might affect house prices, Nationwide states that it expects to see dampening housing activity. Halifax predicts downward pressure in the medium term, and Rightmove is warning buyers and sellers to be mindful of wider economic concerns.

If house prices begin to fall after the stamp duty cut comes to an end, those buying can now see their new home depreciate in value. However, a fall in the price of houses will be good news for first-time buyers and those on the cusp of affording their dream home. 

 For more information or advice contact our team today. 

How Has COVID-19 Impact What Is Most Important To Homeowners?

How Has COVID-19 Impact What Is Most Important To Homeowners?

by | Dec 23, 2020 | COVID-19, Latest News

The COVID-19 pandemic has seen homeowners reevaluate what is most important to them when searching for a new home. The virus has radically changed what homeowners perceive adds value to a home, as working patterns have changed, people commute less and are more likely to be working from home.

The country is seeing a shift away from so-called vanity features, such as a kitchen island or the house’s appearance from the road. Instead of the front of house curb appeal, people who are moving house are looking primarily for more space inside and outside the property. 

 

Change In Facilities Homeowners Want 

There are encouraging signs that the housing market is bouncing back. However, those who are buying a house have changed their priorities.

Homeowners are searching for properties that have a private garden, balcony, or roof terrace. With tough restrictions on socialising indoors, outdoor space couldn’t be more attractive to a prospective buyer. Homebuyers are also looking to buy in neighbourhoods with close proximity to parks, green spaces, and cycle routes.

Second, only to outdoor space, is the desire for a home office. Professionals are remote working, and a space where they can get away from the kids to work or have a Zoom meeting is highly attractive.

Properties with communal spaces are becoming less desirable, along with those located in the centre of built-up urban areas. There is, however, no change in demand for properties close to transportation hubs, such as bus stops and railway stations. 

 

Financial Support For Homeowners 

Homeowners are traveling less and spending more time at home. So it makes sense to invest in a house, renovate, or add an extension. BLG offers property development finance with the best rates to give homeowners affordable solutions to help them make changes and increase their homes’ value.

If you need financial support, get in touch with our team today. 

How Coronavirus has affected the Property Market: Thoughts from the Industry

How Coronavirus has affected the Property Market: Thoughts from the Industry

by | Jun 26, 2020 | COVID-19, Latest News

The past few months have been a time of unprecedented change, with Covid-19 affecting us all personally, impacting every industry and indeed creating change around the globe. As we have started to settle into our new normal, I took the opportunity to meet up (virtually, of course) with a Monitoring Surveyor, Valuer, Lender and Solicitor to find out more about the effects Coronavirus has had on their businesses, work and the industry as a whole. 

 

The Monitoring Surveyor

The Monitoring Surveyor of our discussion group noted that social distancing on sites had been adhered to, with minimal on-site staff showing them in and out. Access to materials such as plaster have been problematic, but with suppliers re-starting production they are confident that this will be remedied soon. Of their 30 live sites, only 2 saw a shut-down due to Coronavirus but all are now open, with one site having 22 parties lining up to view the units prior to completion.

The Valuer

The Valuer in our discussion group has sent staff to sites, fully adhering to PPE requirements, but have found some tenants denying access. They have been able to continue to value properties, however and continue to be busy – with their industrial team being particularly in demand at present. The Valuer noted that PD schemes have mainly been retained as investments, with no current evidence of a major yield shift on larger developments. They have noted a significant uptick in quotes in the last two weeks, with cities outside London in particular picking up in activity. Sheds and beds are the key focus.

The Lender

The Lender has seen somewhat less disruption in recent months, with only 1 out of 41 sites experiencing a Covid-19 related shut down and that site is now back up and running. Recent weeks have also seen an explosion of new enquiries coming in, reminiscent of the figures they last saw in February.

The Solicitor

The Solicitor of the group mentioned that while refinances have been progressing as normal, site acquisitions saw the majority stalling albeit still moving along gradually. However, with 4 completions in the last two weeks, activity is picking up now with their residential property team very busy.  

Moving Forwards

As we move into the next phase of lockdown, a ‘new normal’ will start to emerge. With a few months of working effectively from home under their belts, the Valuer in the group believed that their numerous offices and desks could be downsized in the future with less time in the office. The Solicitors and Monitoring Surveyor agreed with that thought to a lesser extent, believing that there would continue to be a need to have a communal working location. Wherever the location, on the whole, the group agreed that green shoots are starting to be seen within the industry and are cautiously optimistic that things are starting to move once more in the right direction.

By Fintan O’Riordan, BLG’s Business Development Director.

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