MortgagesOct 8 2020

Behind the mortgage market boom

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Behind the mortgage market boom
Pexels/Karl Solano

Mortgage expert Bob Riach has boasted that the housing market is “booming back after lockdown” and that even solicitor firms have started hiring more staff to keep up with demand.  

The proprietor of north Lincolnshire-based Riach Financial Advisers says: “The housing market is booming back after lockdown. I have never been so busy.

“I am currently helping more clients get mortgages every day than I used to in a week. A seller can put their house on the market on a Monday, there will be several viewings on a Tuesday, and it will almost certainly be sold by the Wednesday.

“I have spoken to a local solicitor who says that they are employing more staff to cope with the surge in demand.”

The housing market is booming back after lockdown. I have never been so busy Bob Riach, Riach Financial Advisers

He says this rise in activity was initially difficult to cope with for some sectors of the industry, such as estate agents who were not able to complete many of their usual requirements for buying or selling a house, including viewings or face-to-face meetings during the early part of lockdown.

Key points

  • The mortgage market is very busy
  • Many people are moving out of city centres
  • Lenders are finding it difficult to keep up with demand

However, once they resorted to innovative methods such as virtual viewings and video meetings, they were able to continue working.

He is just one of a growing band of advisers who have witnessed a rise in demand for property as more people have changed their requirements about where they want to live and are looking to get more for their money.

Martin Stewart, director of London-based The Money Group, argues that the rise in people working from home due to Covid-19 has opened up the housing market because city workers are no longer tied down to living in overpopulated and overpriced city centres.

With the government telling people to work from home again just recently, the concept of living a commutable distance from your job is becoming a thing of the past.

Ripple effect

Mr Stewart says: “Last Monday, I had four messages from various clients at different stages in their journey up the property ladder and all of them had decided to abandon city centre living and decamp to pastures new.

“So, the ripple effects of Covid-19 are now starting to reach further parts of our lives and many are now using the changes we have all experienced over the past few months to better enable them to make more positive life decisions.

“Was it all just a dream that we willingly squeezed ourselves onto soulless trains on dark winter mornings to smell someone else’s dinner from the night before and actually pay £500 a month for the privilege?

“It is certainly starting to feel like a long time ago. People buying 100 miles away from their office was previously challenged by the lender, who questioned the plausibility of living so far from where they worked – well that sniff test has gone.”

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.

Sadly, the increased demand and more people working from home has meant time to process applications has grown so much that some lenders have not been able to keep up.

Riach Financial Advisers’ Mr Riach says he has even bought a second mobile phone to use when ringing mortgage lenders as he is often on hold for more than an hour, which restricts him from speaking to clients.

He says: “Times have changed. When uploading documents to a mortgage lender pre-lockdown, the lender would often check these and sign them off within 48 hours. Many lenders’ timescales for this is now between 10 to 16 working days, and then when they request additional information it is a further 10 to 16 working days.

“Most major banks and building societies are now carrying out physical valuations, which again can delay an application.”

Lender issues

This demand has taken a toll on some lenders, including Nottingham for Intermediaries, which last month announced it has temporarily withdrawn its mortgage product range in a bid to support brokers and their clients with business that has already been submitted.

Even big powerhouses such as Nationwide Building Society faced issues as they experienced a major increase in demand for mortgage applications from people looking to move.

A spokesperson for the building society says this is because it is one of the few major lenders offering 90 per cent LTV mortgages to first-time buyers.

Unfortunately, Covid-19 has led to increased complexity in some cases, which means applications are having to be reviewed by underwriters and that can lengthen processing times. However, it has kept brokers updated on service levels on its Nationwide for Intermediaries website.

Interestingly, some lenders have been quick to adapt to the increase in demand through good forward planning.

Coventry Building Society created a virtual contact centre to take calls while working from home, the week before lockdown.

This allowed the building society to take a consistent approach to brokers from the start by staffing appropriately and, when they have needed to, bringing in other colleagues from across the business to look after existing members and payment holiday requests.

Jonathan Stinton, head of intermediary relationships at Coventry Building Society, says: “It has been an extremely busy year for us, but we’ve worked hard to anticipate and mitigate challenges so our high level of service to brokers could be maintained throughout.”

Aamina Zafar is a freelance journalist