The outlook is still unclear, but the mortgage market has signs of optimism.


Via Greig Brown

A variety of adjectives have been used to define 2020, and it may very well be summed up as chaotic when it comes to the residential real estate market.

No one could have expected the amount of demand that then followed during the summer months after a promising start to the year and a three-month shutdown – it was, honestly, incredible.

This level of operation occurred even though, especially when it came to the very common 90 percent and 95 percent markets, the number of mortgage offerings decreased dramatically. In fact, as lenders tried to alleviate the possible economic hazards of the pandemic, these goods were almost extinct.

Efforts to revive the sector were made by the Scottish Government and the temporary improvements to the Land and Buildings Transaction Tax (LBTT) and the First Home Fund definitely offered some impetus, but we have possibly seen a peak and activity is now beginning to level off as we reach the winter months.

The healthcare crisis of Covid 19 is still present and it is possible that the full economic effect is yet to be understood – this, along with the considerable volatility surrounding Brexit, has contributed to the stress of the economy, with public trust still a little fragile.

There is, however, still cause for celebration and positivity, not least from the good news about a vaccine for Covid. At the end of the tunnel, we can actually see some light, and there are some signs that lending institutions have noticed this as well and are starting to look into the future.

When we saw Accord Mortgages bring deals back on the market with a 90 percent loan-to-value ratio, November saw the first signs of optimism among lenders – the first time we’ve really seen such offers since the national freeze in March. First-time buyers, home movers and individuals planning to restructure their loans are available for the sales.

This feel-good aspect was improved when Halifax, one of the largest mortgage lenders in the United Kingdom, resumed lending up to 90 percent to first-time buyers.

It should be remembered that this was not a wholesale rollout by Halifax of 90% of the goods, and that some requirements were applied to it that would not usually apply. The default ratio of loan-to-value (LTV) is set at a multiple of 4.49 and creditworthiness criteria are increased. Furthermore, if, on an application that has already been submitted, an applicant wants to raise the LTV to over 85 percent, the new requirements would apply to them.

It is expected that on these types of mortgages, since many lenders charge a servicing fee, we will typically see higher interest rates. Hence, an extra 5 percent down payment is still worth considering.

In addition to the new offers we expect to see more of in the coming months, the exemption from land transfer tax (or stamp duty) is still valid until March 2021, and the First Home Fund of the Scottish Government should be reopened for applications in the first quarter of next year.

Of course, predicting what the next year will bring is incredibly difficult, and while we may see less closures, it will take some time for life to return to something that comes close to normal.

It might not seem like the best time to explore the real estate market, considering the current volatile climate, but with prices staying at relatively low levels, it may be a good time to dip your toe in the water.

It was definitely one to forget last year, but if you were to secure your dream home in 2021, it might be one to remember next year.

Greig Brown is the mortgage operations director at Aberdein Considine.


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