Chancellor's much anticipated statement has vendors locking in deals, suggests exec
Property sellers are reducing asking prices to strike a deal ahead of the autumn Budget, and completions are taking longer in a still challenging market, according to specialist lender Together.
With the government already warning that the Budget on October 30 will be painful, as it tries to balance its books, speculation has been rife about what it will mean for the property market.
The impact of this uncertainty is already being felt, Together’s director of intermediary sales, Tanya Elmaz, told Mortgage Introducer.
“There are still many challenges in the market,” said Elmaz (pictured). “We’ve noticed completions are taking longer than normal, with sellers having to reduce asking prices to lock in sales ahead of the autumn Budget.
“We’re still seeing large volumes of people remortgaging and purchasing property. We’re only seeing small downward valuations in house prices and these are yet to impact overall activity.”
Homeownership is still a struggle for many first-time buyers, Elmaz noted. The so-called Bank of Mum and Dad has become a major player in the housing market, as parents look to unlock their wealth to help the next generation, but more could be done to simplify the process, Together believes.
“We’d want to see it made as easy as possible for parents to pass down this intergenerational wealth,” Elmaz said. “The government may look at inheritance tax in the Budget and it may make sense to remove some of the complicated and arbitrary rules on funds gifted by family.
“Stamp duty is an area we are looking at closely. We would be interested to see if the government scraps stamp duty alongside council tax in the budget and, instead, charges a new annual property tax. This would raise billions annually for the Exchequer, at the same time putting money back in the pockets of homeowners to spend, boosting local economies.”
How is the forthcoming Budget affecting landlords?
While there hasn’t been the mass exodus of landlords leaving the market as some had predicted in the wake of tax and regulatory changes, the impending Budget is influencing some who have property portfolios, suggested Elmaz.
“The new changes outlined in the Renters’ Reform Bill, coupled with higher mortgage rates over the past few years and the spectre of the government increasing the rate of capital gains tax has made many landlords think again about offloading their buy-to-let properties,” she observed.
“Landlords selling up could spell disaster for prospective tenants looking for somewhere to live. Those lucky enough to find a home in the area where they live will also face higher rents as demand continues to drive up prices. The government also needs to be very careful about putting further regulations on landlords.”
Elmaz believes Labour should show greater support for small and medium-sized house builders and reduce red tape, as it seeks to address the UK’s housing crisis.
“We feel strongly that the answer to achieving house building targets lies with SMEs, and we would like to see better incentives and less red tape, to create a more streamlined process,” she shared. “With their input, we could see a rise in housing stock made available to aspiring homeowners.”
Elmaz is reassured to see some stability returning to the market, especially inflation falling to 1.7%.
“This is expected to have a positive knock-on effect for mortgage rates in the short term, and could be a good sign for the market a year from now,” she said. “Of course, anything could happen, as we have seen previously with COVID, global conflict and the disastrous mini-budget, for example, but the property market has often proved more resilient than expected and bricks and mortar has always been seen as a solid investment.”
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What is the prospect for the specialist finance market?
Together has published a new report suggesting that the value of the specialist mortgage market could swell by 70% in the next five years, to £54bn. It concludes that the changing nature of society and family relationships has made the needs of today’s mortgage borrowers more diverse than in the past.
In addition, the fall-out from the cost-of-living crisis is also predicted to harm potential borrowers’ ability to access credit, fuelling an increasing need for support from specialist lenders.
“Mainstream banks have lost the appetite to lend to customers in more complex situations, and those who don’t fit their rigid criteria are consistently being let down in their pursuit of homeownership,” Elmaz said. “Numbers of applications from borrowers deemed ‘non-standard’ are only growing, and the UK mainstream mortgage market hasn’t adapted to the way people now live their lives.”
A third of respondents to Together’s study want to see housing and planning reforms, with 12% wanting more help for first-time buyers and 7% keen to see the creation of new property schemes.
“Our report findings have shown that a shocking 61% of these borrowers don’t think it’s likely they’ll own a home by the end of 2025, which is incredibly disheartening to hear,” Elmaz commented. “We have maintained a healthy appetite to lend.
“Everyone’s personal circumstances are unique and lenders must be able to take this into account. The number of regulated mortgage applicants classed as ‘non-standard’ will only increase in the next five years.”
Brokers need to be able to cater to customers with different backgrounds, and in different situations, Elmaz urged, adding that those who fall behind in their knowledge of specialist finance will likely lose business to those able to serve a variety of profiles.
