New Help For First Time Buyers But Barriers Remain
One of the key indicators that the mortgage market is beginning to stabilise can be seen in the range of products being launched to the market. One example of this comes from the Clydesdale/Yorkshire Bank re-introducing its 90% LTV mortgage for first-time buyers.
This is a three-year fixed-rate mortgage that comes with an initial rate of 2.39% which reverts to 4.55%. Some of the critical features of this mortgage are that there is no product fee, there are free valuations, and there is a £250 cashback offer.
This product is just one of the options which are being offered to first-time buyers. There is a considerable level of uncertainty in the property market. However, in uncertainty, there are opportunities. For some first-time buyers, the market is not welcoming at this time, but for other would-be buyers, there is a genuine opportunity.
Therefore, first-time buyers should feel optimistic that there are options to consider, but equally, those looking for the best products might have a longer wait.
Physical valuations face lengthy delays
This is because there is likely to be a lengthy wait for mortgages with a 5% deposit, and this is directly linked to the COVID-19 pandemic. Mortgage lenders need to consider their risk when offering mortgage products, and it seems as though lenders are not willing to offer their most appealing mortgages without a physical valuation.
Research carried out by Moneyfacts indicates HSBC is the only company offering a 90% LTV mortgage through the use of automated valuations right now.
It is easy for people, and the industry, to focus on the financial challenges associated with COVID-19, but there are logistical and physical barriers to overcome in the market as well. While the housing market re-opened in May 2019, there is still a hesitancy to carry out physical valuations. Government guidance on social distancing advises against this, which creates a natural barrier in the mortgage market.
Backlog in the market will delay property deals
With lockdown restrictions loosening in June, there might be some movement in the market, but it should be remembered there is a backlog in the market. Figures provided by Zoopla suggest a total of 370,000 houses have been delayed due to the coronavirus lockdown. Since the market re-opened, some of these deals have concluded, but there are still deals in limbo because of the need to arrange a physical valuation.
There is an estimate that there is a backlog of 60,000 properties requiring a physical valuation, and this isn’t going to be cleared overnight.
An interesting aspect in the industry is that the average age of surveyors in the United Kingdom is 55, according to The Royal Institute for Chartered Surveyors (RICS). When you consider the proportion of employees in this age who have been furloughed or who are self-isolating to protect themselves, there might be a noticeable delay in real property valuations for some time to come in the UK.
Applying for a mortgage is the last thing many people are considering, but for some individuals and households, now is the right time. Mortgage lenders are still active, so anyone interested in arranging a mortgage, should prepare themselves for the process, and speak with industry experts.