Mortgage Market Update – 2021

Video Script

I just thought I’d create a video on my personal predictions for 2021 and beyond. Just to get my thoughts down on paper and share them with you.

2020 was quite an experience for all of us, not just here in the UK but globally.

The mortgage and property market was heavily affected, but do I feel there are signs of any changes?

If this sounds like something you’d be interested in, stick around.

Hi if we haven’t met before, my name is Dan, I am a CeMAP qualified mortgage & protection adviser. This video is purely for educational purposes only, and should not be seen as advice or a recommendation to act and I must stress your home may be repossessed if you do not keep up with the repayments on the mortgage.

With that out of the way, on with the video.

So here is a video on my personal predictions for the remainder of 2021, through to 2022.

In my opinion, I feel mortgage rates will remain low for a period of time. It can be, for some, still quite difficult to get on the housing ladder or to move home. Personally, I feel the government and bank of England will work together to fix this.

In 2020 mortgages for those with 5% and 10% deposits completely dried up but rates have remained attractive to those with a larger deposit behind them.

With the base rate unlikely to rise in the next few months, mortgage rates will remain very attractive, for those who can get them.

90% loan to value mortgage rates will begin to drop.
In 2020 mortgages for those with a 10% deposit or equity within their home, suddenly fell off a cliff edge. There were loads of options, then there were hardly any.

It was like having the rug pulled from out underneath you. I had first-hand experience with seeing how many people this affected.

But now there appears to be light at the end of the tunnel. Towards the end of last year, lenders started to creep back into the market with 90% loan to value rates, but cautiously.

The rates that they came to the market with were significantly higher than those before the pandemic but I feel these are going to drop as lenders start to gain more confidence by being back in the market and monitoring the situation.

Especially with the introduction of 95% mortgages, I believe this could see a drop in 90% rates. Which is great news for anyone who is a first-time buyer or looking to move with a 10% deposit.

This brings me nicely onto 95% mortgages.
It appears that most lenders who were going to take part in the 95% mortgage guarantee scheme have come forward, in preparation for the 19th April.

The scheme runs until 31st December 2022 so don’t panic or rush to buy a property. You can get more information about this by watching my video here

If you have a 5% deposit but find the lenders are unwilling to lend due to affordability purposes then your parents may be able to help. Watch this video on how your parents can help you get on the property ladder.

Or you have the option of the Help to Buy scheme.

Although I feel that the Help to Buy scheme may get off to a slow start. The new version of the Help to Buy scheme will launch this month, but this time it is limited to first-time buyers and also it has regional price caps.

There are negatives as well as positives to the Help to Buy scheme, I covered a video on this here.

In theory, this means first-time buyers will be able to get on the ladder with a 5% deposit, but with the 95% mortgage guarantee scheme right around the corner, you may find that the Help to Buy scheme isn’t suitable for you and the 95% mortgage guarantee scheme is your preference.

If you choose a good mortgage adviser, they’ll help you make this decision or alternatively you can educate yourself by watching the video I made but remember that my video is in no way advice, you will need to speak to a qualified adviser about your circumstances before making this decision.

Homeowners will borrow more for home improvements

2020, the year of the lockdown. The year when people spent so much more time at home, and as a result, this has changed the way that most of us view our properties.

For many, that meant rushing to move home to beat the stamp duty holiday deadline, but those who were unable to move for various reasons stayed put and could have benefited from cheap mortgage rates to borrow more to improve their homes, whether it was internal decoration or building an extension to provide more room. Such as a home office, to separate work life from family life.

I feel this isn’t going to change in 2021 or 2022, I still feel like I’ll be approached by clients wanting to improve their own homes whilst rates are as low as they currently are.

Lenders will start to lend more.
Why not?
The Bank of England could conduct a review of its mortgage rules, which cap the number of mortgages offered at four-and-a-half times the applicant’s annual income or higher.

A relaxation of these restrictions might boost the borrowing power of first-time buyers.

All eyes will be on the furlough scheme The furlough scheme is set to run until the end of September 2021 and what happens once it closes will have a significant effect on people looking to remortgage.

Millions of homeowners saw their mortgage options limited in 2020, with banks reluctant to lend to people who’d been furloughed by their employer, and this is still very much the case.

This meant that for many, the only option was to switch to another deal with their current lender, potentially missing out on better rates elsewhere.

If the economy struggles and unemployment rises, millions of homeowners could again see their options limited in 2021.

Another hot topic will be Payment holidays and credit reports Mortgage payment holiday applications have been extended to the end of July 2021, and how banks approach mortgage lending after this date will be crucial.

Payment holidays won’t be registered as missed payments on your credit report, but lenders will be able to see if you’ve had a payment holiday when you apply for a mortgage in the future.

At this stage, we don’t know whether people who’ve taken out payment holidays will find it harder to borrow, but how banks approach this will dictate the remortgaging options available to millions of homeowners.

For example, I had a couple of customers with tens of thousands in savings opting for payment holidays. I advised them not to, but they have gone against my advice and taken them anyway.

I am fearful that with open banking now available to the majority of lenders, they’ll take precaution before lending to these clients.
The stamp duty cut won’t bring a mortgage boom.
Buy-to-let landlords in England, Scotland and Northern Ireland can all make the most of the current stamp duty cut, but there’s unlikely to be a rush in mortgage applications from investors.

I have already seen a drop off of applications being made from landlords as solicitors are unprepared to commit to meeting any further deadlines, leaving landlords unsure of their budgets and profits.

Rates will fall, but don’t expect them to drop by much!
Buy-to-let mortgage rates appeared to have risen slightly since the start of the pandemic, but there are signs that costs are coming down again.

I get informed of regular rate changes and in the majority of instances, rates appear to be dropping, and not rising.

It’s likely that we’ll see relatively small rate cuts rather than major ones for the rest of 2021, primarily around the higher loan to value products, and lenders may look to start to lend more as they make their affordability calculators more lenient.

Landlords will look to keep their options open
I am very fortunate to have quite a range of clients who are landlords. Anywhere from small landlords to those with a significant amount of properties.

I keep in regular contact with them to get a general feel for how they see the market. This is of course not reflective of everybody’s opinion but it’s as close as I’ll be able to get.

Around a year ago, it was predicted that landlords would lock into shorter-term mortgages in 2020, with uncertainty around Brexit and the pandemic.

With risk-averse landlords addressing the future profitability of owning a buy-to-let property.

With the added complexities around the pandemic, such as the eviction process and a lack of clarity around renting rules afterwards, it may be more of the same in 2021 and 2022, with some smaller or risk-averse landlords keeping their options open by taking out two-year fixes rather than longer-term deals.

Hopefully, you’ve found this video helpful, as I said at the beginning I just wanted to get my thoughts down on paper and share them with you.

It will be interesting to watch this video back to see how my predictions turned out.

If you’re a first time buyer or looking to move, watch this video for more information.

Thanks for watching.

See you next week.

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