How did the mortgage market treat you in 2020?
Thursday 17 December, 2020
In this article Vishal Gulrajani reviews the changes that took place in the mortgage market during 2020 and what he expects for 2021.
A positive start to 2020
As Christmas approaches, I thought it would be a good time to review the mortgage market in 2020. To say it has been a strange year would be an understatement, especially if we turn our attention back to the start of the year.
I know it seems a long time ago but 2020 did start off positively with rising house prices. Mortgage lenders generally required 5% deposits and offered relatively low interest rates on many mortgage products. At this point many people thought we were going to experience a prosperous year of economic growth, our only real concern on the horizon was Brexit and negotiating a trade deal with the EU.
Mortgage lenders reduced their lending during the pandemic
Fast forward to March 2020 when the United Kingdom was put into lockdown due to Covid 19. Everyone who could was forced to adapt and work from home without no real warning. By April the mortgage market was in disarray, as some people couldn’t work so mortgage payment holidays were offered. Many banks were operating at a high-risk level with a lack of cash flow and at this time we only had one lender operating at a 10% deposit level, but their lending limits at this level were already utilised for the day by 9am. Therefore, the very promising start to the year quickly turned into one of the worst recessions the country has experienced. The mortgage market suffered, and 15% deposit mortgages became the new norm.
Property market re-opens in late spring to increased demand for property
From what was one of the scariest and darkest times both in terms of our society’s health and the economy came a bit of hope in spring as the infection rate started to drop, and by late May the property market reopened. Although 5% deposits were unavailable and 10% deposits were impractical and nearly impossible to secure, the property market experienced an early surge as people who could afford to do so, wanted to upgrade their home as more people realised that they may be working from home for a long time.
Stamp duty cut incentivises the mortgage market
By July we saw a stamp duty cut to incentivise the mortgage market and we really have been inundated with interest ever since, especially for first time buyer mortgages. Although bigger deposits were needed to secure a mortgage, we dealt with many parents willing to re-mortgage their own home and gift extra money to their children so they could purchase their first home. This gifting enabled the older generation to effectively pass their inheritance to future generations at an earlier age.
By the end of September house prices started to increase in many areas of London and spending picked up.
More lenders reducing their deposit requirements
To say it has been a rollercoaster of emotions would be an understatement. However, the good news doesn’t actually stop there as we are now seeing more lenders re-enter the 10% deposit market, and there are plans for the government to reintroduce a 5% deposit scheme, and a new help to buy scheme. Some lenders are also willing to help mortgage prisoners. I won’t talk about the new lockdown because I think this year has been depressing enough, but in terms of the economic outlook and the mortgage market things look better than we could have ever hoped for back in March.
Vishal Gulrajani, Mortgage Broker in Goff’s Oak & Cheshunt, Hertfordshire said:
‘Overall, this year has been strange and even while typing this article I feel exhausted just thinking about what we have all gone through. However, I am proud with the way everyone in the mortgage market has adapted to the new normal. There is still a long way to go as lenders, solicitors, clients and even the Thomas Oliver mortgage broking team adapt to a new way of working as we deploy technological infrastructure changes. If you are looking to move home in 2021, remember the stamp duty holiday is still available until 31/3/21. Please call your mortgage advisor on 01707 872000 for mortgage advice before you start house hunting, as we can save you time by advising you how much you can borrow. By the time I post this article we hope that a Brexit deal can be negotiated and given the Covid vaccine there is now light at the end of the tunnel. It has been an emotional year, but all the Thomas Oliver mortgage brokers and financial advisers wish you a Merry Christmas and Happy new year. We hope that you and your families keep safe and that 2021 will be a better year for everyone.’
Your property may be repossessed if you do not keep up repayments on your mortgage.