The property market is currently in a mini-boom with record levels of buyers and activity, but many lenders were wary of getting caught up in the furore. Paresh Raja explains how the specialist finance industry has stepped in to fill the void left by the mainstream lenders.
Real estate has always been a core part of the UK’s economy. With the property market totalled at £1,662 billion, it’s understandable that government efforts to facilitate a post-COVID-19 economic recovery would focus primarily on getting the real estate sector moving once again.
January 2020 saw incredible levels of activity in the housing sector that was scuppered by the COVID-19 pandemic. Now that the virus is in retreat and case numbers stabilising, government officials are being tasked with luring buyers back to the market, releasing the pent-up demand for property that has been accruing throughout this year.
The biggest step taken in this effort was the introduction of the Stamp Duty Land Tax (SDLT) holiday, which is now in place until 31st March 2021. This means that the first £500,000 on all property purchases throughout the nation will now be entirely exempt from the tax, saving the average buyer £4,500.
So far, the policy seems to be having a demonstratable success. The property listing site Rightmove recorded an impressive 75% increase in buyer enquiries in the two weeks following the policy’s introduction – and the Halifax July HPI, the first since the holiday’s implementation, showed UK house rising prices year on year and month on month.
For these impressive figures to translate into transactions, buyers must have proper access to financing to fund their purchases. This will prove challenging for many, given many traditional lenders have become more stringent in how they deploy their loans. So, what are the other available finance options?
Unleashing the Full Potential of the SDLT Holiday
During the height of lockdown, mainstream lenders and banks withdrew and limited their mortgage products; an act they believed to be the only acceptable action to take during a time of unprecedented, immeasurable levels of risk.
New applications were frozen, already-agreed-too loans were delayed, and the risk of multiple property chains collapsing became ever more present.
So, brokers, buyers, and investors all needed to find alternative sources of loans. This is where the specialist finance industry stepped in to help support transactions where traditional lenders wouldn’t.
The speed, agility, and flexibility of specialist finance firms meant that they could deploy their loans within a matter of days – perfect for buyers who had been let down by their normal lender at the last moment. Of the few transactions that were completed on during the height of lockdown; a large proportion were thanks to specialist financiers.
Now that the mainstream lenders are returning to the market, one may think that the need for specialist finance firms has lessened. On the contrary, the market demand for the services they provide has never been greater.
Although these banks and mainstream lenders have now returned their 90% LTV products to their services, they remain increasingly obstinate when it comes to actually approving applications.
In a bid to eliminate any modicum of risk, applicants who participated in the mortgage repayment holiday at the beginning of the pandemic have recently been seeing their applications denied for this very reason.
Buyers and their brokers must, therefore, once again utilise the benefits of the specialist finance industry to financially support their planned property purchases and take advantage of the SDLT holiday.
Similar to the aftermath of the Global Financial Crisis, where the specialist finance industry was born, creative thinking and innovative solutions are now needed to help fuel the property sector’s economic recovery. This is why bridging loans are particularly useful.
At this critical juncture, then, mortgage and bridging products must be available to all if the full potential of the SDLT holiday is to be realised. If buyers across the nation gain a full appreciation of the products and services available beyond the high street, I anticipate a full recovery of the UK’s property industry sooner, rather than later.
This article was written by Paresh Raja, CEO of Market Financial Solutions.
Paresh Raja is the founder and CEO of Market Financial Solutions (MFS) – a London-based, specialist finance provider. Prior to establishing MFS in 2006, Paresh worked as a senior professional consultant in one of the top five management consultancy firms, and also set up an independent investment group.
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