Mortgage warning: ‘Time is running out’ as public call for stamp duty rule extension
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Mortgage approval rates have risen at record pace according to the latest data from the Bank of England. According to the central banks latest figures, approvals jumped to around 91,500 in September, up from around 85,000 on the previous month.
Hugh Wade-Jones, the Managing Director of Enness Global Mortgages, explained just how substantial these results are: “Prospective home buyers have continued to fuel the furnaces of the UK property market with another huge uplift in mortgage approval figures.
“The highest rate of approvals since 2007 tells you all you need to know about the dramatic return to form currently being seen, as buyers are returning in their droves ahead of the stamp duty holiday deadline.
“This is despite the fact that lenders have started to penalise the applications of buyers they consider to be in more changeable circumstances such as the self-employed or those heavily reliant on commission.
“At the same time, first-time buyers have also seen the range of products open to them dwindle with many required to stump up larger deposits to secure a mortgage.
“However, this tightening of the belt is yet to cause any dent in top-level market activity and mortgage approval figures are soaring.
“This growth has been maintained by a high level of deals that continue to be done by second and third rung buyers, in particular.”
On the demand for property, Richard Pike, a Director at Phoebus Software, also offered analysis.
As he warned: “The general consensus in the market is that time is running out if buyers want to see the benefits of the stamp duty holiday as we now see more properties progressing through the sales system, creating backlogs in the pipeline.
It is widely noted that to be in with a chance of beating the stamp duty holiday, a sale should be secured by Christmas at the latest.
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“The issue at hand, however, is that the market is being driven by home movers and their hunger for different types of properties in post-lockdown life.
“As we look forward with an air of caution, we must ask ourselves what the market will look like in 2021 without government incentives propping it up?”
Stamp duty rules were temporarily upended earlier on in the year in a bit to help home buyers and keep the property industry afloat.
The stamp duty threshold was raised to £500,000, which according to reports could save buyers as much as £15,000.
Given how impactful the stamp duty changes have proven to be, calls have emerged to extend the rules beyond their current deadline.
These calls have grown in recent months as it became clear coronavirus would continue to cause economic damage into 2021 as Paresh Raja, the CEO of Market Financial Solutions, detailed: “The Stamp Duty holiday has been a great success in stimulating property investment.
“While other sectors face hardships, the property market has benefited from a sustained surge in buyer demand for residential real estate.
“With the holiday coming to an end on 31st March 2021, we are now facing the opposite problem – the market simply does not have the capacity to meet buyer demand.
“Mortgage providers are taking longer to process applications, and the lack of available loans has made findings the right type of finance difficult for prospective buyers.
“My concern is that this will lead to a backlog of sales, and could result in many buyers missing out on the holiday due to the fact that lenders are simply not able to release the volume of loans needed.
“The government has two choices. The first is to extend the SDLT holiday beyond the current deadline. The second is to put into place arrangements to ensure that buyers who have agreed to a sale prior to the deadline still qualify for the tax relief should the sale occur after 31st March 2021.
“Regardless, it is important that mainstream and alternative lenders ensure they are ready and to meet the growing market demand for finance. This will be vital in supporting the UK’s post-pandemic recovery.”
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