Now is not the time for complacency

It is hard not to be impressed by the property market’s reaction to the Stamp Duty Land Tax (SDLT) holiday. Since its announcement in early July, international and domestic buyers have been actively seeking out new property investment opportunities.

For the government, this is extremely positive news. As part of an attempt to bring about the country’s post-pandemic economic recovery, Chancellor Rishi Sunak wants consumers to spend and investors to invest.

We only need to look at the latest house price growth figures to understand the success the SDLT is having. According to Halifax, annual house price growth increased to 7.3% in September, up from 5.2% in August. This means the average house price is now sitting at ￡245,747.

While this is an impressive statistic, I also believe we need to be realistic about the challenges the property market currently faces. Afterall, it would foolish to assume that this rate of house price growth is sustainable in the long-term.

Yes, the property market has had an incredibly successful summer. And while post-lockdown demand is driving house prices higher, the truth of the matter is that rate of this growth will inevitably subside. With talks of a second lockdown gathering momentum and the rate of new COVID-19 cases increasing, we could be in for a challenging winter.  

When I speak about challenges, what I’m concerned about are the buyers who are not able to complete on a sale due to the limited availability of mortgages. The number of mortgage products available is nowhere the number it was before the lockdown. The risk of a mortgage being denied is high – according to Market Financial Solutions’ research, one in three homebuyers have been denied a mortgage since the introduction of the stamp duty holiday.

While Boris Johnson’s announcement that first-time buyers can take out a long-term, fixed-rate mortgage of up to 95% of the value of the home is promising, I fear this reform is too little, too late. This scheme will not be launched until next year and we still don’t know how it will work in practice. 

Mortgage delays and denials could rise in the coming months, particularly with the furlough scheme coming to an end and banks seeking to minimise their risk exposure. If not addressed, we could see buyer momentum suddenly coming to a halt. Both mainstream and alternative finance lenders need to step up and work with their customers so that they can successfully complete on a sale during the holiday period.

MFS is playing its part, ensuring that property investors have access to loans that can be deployed quickly. That’s why we launched a dedicated ￡60 million COVID-19 fund. 

For more information on our COVID-19 fund, or to find out how you can take advantage of bridging loans, get in touch with a member of the MFS team today. Email: [email protected]