Donna Wells, Director at F4B
We have entered H2 2021 on the back of what can only be described as a frenetic six months for all sectors across the mortgage market. The main driving force has obviously been a housing market which only seems to go from strength to strength. To put this into some context, the latest Zoopla/Hometrack house price index revealed that the average price of a house in the UK now stands at £230,700, some 30% above the market peak seen in 2007.
House price growth was reported to be up 5.4% year-on-year in June, more than double the 2.2% year-on-year price growth seen 12 months ago. The data outlined that prices are being propped up, in part at least, by a chronic undersupply of properties coming to market, with a 25% fall in the volume of homes for sale in the first half of the year when compared to H1 2020.
Transaction volumes have remained strong – up 22% on the average levels seen in 2020. Buyer demand was suggested to have dipped 9% in the first half of July after the ending of the initial stamp duty holiday but does remain elevated – up 80% compared to the average for this time of year in the more ‘normal’ market conditions of 2017-19.
This slight lull may have been experienced across the mainstream residential marketplace but a variety of specialist lending avenues are seeing heightened activity levels as property professionals across the UK continue to take advantage of emerging opportunities.
The importance of the specialist BTL market
The importance of the specialist BTL market, and the benefits attached to using lenders operating within this space was evident in research from Smart Money People. This study found complex buy-to-let lenders to be rated 96% for their flexibility by brokers. Mainstream buy-to-let lenders were rated 87% for flexibility. Overall, lenders across all categories scored a rating of 79% for flexibility. Comparing the two types of buy-to-let lending, brokers also rated the underwriting from complex buy-to-let lenders higher than mainstream buy-to-let lenders, with a rating of 50% compared to 32%. The overall average across all lenders in this category was 51%.
This data also found a slight difference between how easy a broker thinks these lenders are to place an application with. Complex buy-to-let lenders were rated 67% compared to 80% for mainstream buy-to-let lender applications for ease. This is an interesting area as, by definition, such cases are more complex which means more hoops to jump through and additional difficulties in sourcing the right solution from the right lender. As such, I wonder just how many of those respondents who did question this ease of use of complex buy-to-let lenders have utilised the benefits of a packager and/or how well these cases had been packaged by individual brokers to come to this conclusion. After all, the use of a specialist packager can expediate and simplify this process massively whilst also helping to manage expectation throughout application to completion, however complex the transaction may be.
Bridging finance and the property market
Speed is also a vital component within bridging finance and a buoyant property market continues to drive confidence throughout this sector. This was outlined in a recent survey from Shawbrook Bank which showed that more than a quarter (26%) of brokers believe that the bridging market is best positioned to benefit from the current strength of the property market.
Semi-commercial was the second most likely area to grow with 24% of brokers predicting strong growth, followed in third place by buy-to-let at 23%. 67% of brokers have reported an increase in business volumes since the start of the year with half reporting an increase of 20% or more in current business levels. The research also found that a substantial 71% of brokers expect to see landlords increase the number of properties in their portfolios this year.
Brokers also reported a shift in buying patterns, with 44% noticing a change in the types of residential properties that their client is looking to buy. 42% admitted that the main reason for this swing is because of the stronger rental yields that are currently being achieved by alternative property types.
This data helps highlight the benefits attached to the specialist lending market and I fully expect bridging finance and complex BTL to become even more prominent for a variety of property-related transactions over the next six months and beyond.