Behind the mortgage market boom

Ricky Chan, director and chartered financial planner at London-based IFS Wealth & Pensions, has also noticed an uptick in demand for mortgage advice for both residential and buy-to-let purchases. He says business is flourishing thanks to multiple factors, including the mini stamp duty holiday.

He says: “I believe the recent increase in demand for mortgages is due to a combination of factors. The biggest and least surprising being the mini stamp duty holiday, which has brought forward the purchases of would-be buyers in the future; the second being the pent-up demand during the three-month lockdown in March 2020; and finally the government’s job retention scheme and mortgage holiday measures to help mortgage borrowers stay afloat.

“This led to a significant increase in mortgage lender turnaround times, during a time when there were fewer staff, remote working, illness and delays to the valuation process, which could add a further two to three weeks to the process.”

New measures

Interestingly, Mr Chan says this rise in demand has forced many lenders to add new measures in order to cope.

He says: “Many lenders are trying to cope with the demand by adding new measures, such as: increasing their interest rates across all loan-to-value ranges and across all lenders; withdrawing higher LTV products such as 90 per cent plus; manipulating the affordability calculators/stress tests conducted by lenders to promote higher lending to longer five-year fixed-rate products than shorter-term ones, thereby tying in applicants in for longer; restricting applications to just remortgages/product switches by existing clients; prioritising residential mortgages over BTLs; and conducting more desktop valuations rather than physical ones.

“This has added a lot of stress to an already difficult time for both mortgage applicants and brokers as criteria and products could change overnight, with little time to react.”

The increase in demand was echoed by data from Legal & General Mortgage Club, which revealed a growing demand among first-time buyers who want to enter the BTL market.

Searches through its SmartrCriteria tool, which helps advisers determine which lenders would consider a particular mortgage applicant, shows that the criteria search combination for first-time buyers, first-time landlord and non-owner occupier has seen an 18 per cent increase since the beginning of September.

Lengthy process

But ensuring timely transactions is important. The latest research by home-buying platform Yes Homebuyers revealed it takes an average of nine weeks between the point of listing your home for sale and accepting an offer. In the 11 weeks it then takes for the average sale to complete after accepting an offer, as many as 225,000 transactions fall through each year. With the average home seller having already incurred costs of £2,700 at this point, transaction fall-throughs are costing home sellers £607m a year.