MANY of us have waited out lockdown in a house or flat that isn’t quite what we had hoped for and are now hoping for change. Andrew Montlake, a mortgage broker from Coreco, says there is ‘pent-up demand’ in many areas from customers who are desperate to move house.
‘Amid the radical uncertainty, there are still so many reasons why people want to buy, whether that’s to move to the country to be better placed for a potential second wave, to grow a family, move to a better school catchment area or because of a marital break-up,’ he says.
Rishi Sunak’s announcement that movers would save on stamp duty until March 31 next year has made moving more attractive, as it potentially saves buyers £15,000, but there are still many barriers standing in the way of those wanting to buy something new.
For a start, there are the guidelines to protect vendors, buyers and estate agents from coronavirus. Viewing a property in full PPE may not be everyone’s idea of fun, while many may baulk at buying a property they’ve only seen on a ‘virtual tour’.
Then, there are the financial factors. Mortgage lenders are being stricter than ever on first-time buyers and the self-employed, while many people are on furlough and fear redundancy, and others worry about the effect coronavirus will have on their long-term prosperity.
With all of this in mind, what should you do if lockdown has made you desperate for a new property? Experts suggest it’s still perfectly possible to move successfully, and to make the most of the stamp duty holiday now, but there are a few extra things to bear in mind. Here’s how to get started.Get your financial house in order If you want to borrow money to buy a house, mortgage lenders have always wanted to look at your bank statements, but in the current climate it is more important than ever that you look like a safe bet to lenders, particularly if you are a first-time buyer or self-employed.
‘The pandemic has made lenders more cautious about property prices and how stable a borrower’s job and income is. This means borrowers are coming under more scrutiny when applying for a loan,’ says Jonathan Harris, managing director of mortgage broker Forensic Property Finance.
‘Lenders are scrutinising bank statements more than in the past to see whether the borrower is under pressure financially. They are looking specifically to see whether there is any pattern. They may compare the previous three months’ statements with the three months before that to see whether you are in difficulty.’
Mark Harris, chief executive of mortgage broker SPF Private Clients, says that getting a loan may mean paying down any other debt you have, as well as ensuring that your credit rating is squeaky clean.
‘Reducing your debt and getting your paperwork together, including personal and if relevant business accounts, is as important as ever. An accountant’s reference is also advisable if you are self-employed,’ he says.
Jonathan, at Forensic, adds that people who have taken a mortgage holiday during the pandemic may find it hard to get a loan. ‘This is unfair as the government practically encouraged borrowers to take payment holidays when Covid struck, saying they would not affect your credit history,’ he says. ‘However, we have seen borrowers with blips on their credit files even though they had the payment holiday agreed with their lender. In future, this will mean they must demonstrate that their employment and financial position is back on an even keel before they are considered for a loan.’
Make your current home an attractive prospect
If you are looking to sell an existing property, knowing current customer priorities may help you to get a buyer. Andrew, at Coreco, says more buyers are looking for home offices and outside spaces after lockdown, so marketing your home with its homeworking potential in mind may make it more attractive. ‘Everyone is looking for more space and a garden,’ he says.
While social distancing guidelines make it harder to view a house, it is still possible, while ensuring that you or your estate agent provides floor plans and a good virtual tour should help to increase footfall. According to Miles Shipside, director at property website Rightmove, there has been record demand for property on the website since the market reopened, further boosted by the stamp duty holiday, so ensuring your property looks good online is vital.
Get a good value mortgage offer
While it is harder for those with a smaller deposit to get a mortgage, there is good news for those with more funds or a property to sell. The Bank of England cut rates to a record low of 0.1 per cent in March, and this means that many borrowers can get a fixed rate mortgage for under two per cent. ‘Rates remain extremely low and are unlikely to rise anytime soon, given that the economy is in such a fragile state,’ says Jonathan, at Forensic. Figures from Moneyfacts, the financial data provider, show that those who want to fix their mortgage rate for two years can get a rate as low as 1.24 per cent with HSBC, provided that they have a 25 per cent deposit.
However, Jonathan adds that most borrowers still prefer to fix their mortgage rate for five years, which provides security in the medium term. For those with a 25 per cent deposit who are happy to pay a £999 fee, it is possible to get a five-year fixed mortgage for 1.48 per cent with Barclays. First-time buyers, who frequently have lower deposits, will have to pay a higher interest rate. First Direct is offering a two-year fixed rate product for those who have a ten per cent deposit for 2.29 per cent, or a five-year fixed rate product at 2.59 per cent. For the self-employed, and those with more complex situations, using a mortgage broker may be the easiest way to find a lender. As always, having a mortgage offer in principle will help you to be taken seriously by vendors, and will help the process move faster.
Don’t miss the boat
In the current climate, delays are inevitable. Andrew, at Coreco, says that many lenders have staff working from home and this is creating a backlog, as progress is slower.
That means it is important to be mindful of the deadline to benefit from the stamp duty holiday, even though it might look generous. Purchases must be completed by March 31 next year to qualify. ‘Purchases can often take longer than expected,’ says Doug Honeywell, mortgages expert at Moneysupermarket.com, pointing out that last year the average time to complete a mortgage application was four months, and this year there are complicating factors, so that may be even longer.
‘Be wary of long chains that could slow down the buying process,’ he says.
Ensuring a mortgage deal is in place early, and that paperwork is in order will speed up conveyancing. Some solicitors and estate agents still have staff on furlough, which can further slow down the process, so check whether you will always have a named contact to deal with.
Think before you go
Many of us have good reasons to want to move house, and the stamp duty cut makes the whole process better value, but it’s also worth considering whether it could be more cost-effective to improve an existing property while remortgaging onto a cheaper rate.
It’s also possible to borrow more money on your mortgage to carry out home improvements, such as adding an extension so that you can work from home. Figures from mortgage broker Trussle show that while 18 per cent of homeowners want to upsize their home after lockdown, 68 per cent are considering remortgaging to save money and to make home improvements. The most popular are refitting a kitchen and bathroom or landscaping a garden, while extensions and home offices are also popular.
Miles Robinson, head of mortgages for Trussle, says: ‘A number of homeowners are reconsidering what they think is important in a home and considering how they can improve their current living situation to suit their needs,’ he says.
What is the stamp duty holiday and how could you save?
WHEN you buy a piece of land or a home worth over £125,000 you normally pay a tax known as stamp duty.
The rate that was charged is tiered depending on the amount you pay, rising from two per cent on the portion up to £250,000 through to 12 per cent on anything above £1.5m. First-time buyers didn’t pay stamp duty on the first £300,000 of their property, as long as the home doesn’t cost more than £500,000 in total. Those buying a second home pay a further three per cent on top of these rates on properties worth £40,000 or more. Rishi Sunak’s stamp duty holiday means that all homebuyers will only start to pay stamp duty one property purchases of more than £500,000, offering potential savings of up to £15,000. This will be in force until March 31 next year. While those buying second homes will also benefit, they will still pay the extra three per cent on the entire purchase price.
‘This could put up to £15,000 in the pockets of those looking to make the next move and could be the push the property market needs to get it back on its feet again,’ says Miles, from Trussle.
‘We’ll be spending the stamp duty savings on home improvements’
LYNNETTE PECK and her husband, Barry, are moving across Bristol to avoid a one-hour long school run for two teenage children every morning, but the lockdown brought first frustration and then an unexpected bonus.
‘We were all set and it was going nicely, but then both the estate agent and the solicitor were put on furlough,’ she explains. ‘It’s meant a lot of work for me finding the right documents.’
Lynette, 52, runs a clothing business called Lovely’s Vintage Emporium, which has been busier than ever, she says.
‘I’ve basically had to keep the whole thing going myself while homeschooling the children and walking the dogs and running the business.’
However, when Rishi Sunak announced the stamp duty holiday, she realised it would save the family £10,500.
‘We’ll spend it on improvements that we knew we would have to do anyway,’ she says. ‘But it’s great to have the saving, and we’re so glad we’ve kept going.’
‘We’ll save £15,000, thanks to the stamp duty holiday’
SALLY LOVETT, from Surrey, put an offer in on a property before lockdown started.
‘We used to live in Teddington, but moved further out, and we’ve really missed it,’ explains the 36-year-old, who runs workplace wellbeing company Stretching The City. ‘We didn’t really gel with the area we relocated to, so we’ve decided to move back.’
She and her husband Steve offered on a house just opposite Bushy Park, but Sally says that the conveyancing process has been very slow since lockdown began. ‘It feels like it is waking up a little now, though’.
The delays, however frustrating at the time, have worked in the couple’s favour. They will now benefit from the recently announced stamp duty holiday. Instead of having to pay over £31,000, that will now be nearer £16,000.
‘We won’t be using it for an exotic holiday, but the house does need some things doing to it, including the windows,’ she says. ‘It’s brilliant that we qualify. When it was first announced we thought we would be over the threshold.’