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Commercial Finance – Business Interruption Loans and COVID

How COVID-19 Has Impacted Commercial Finance

The COVID-19 pandemic has left a lasting impact on many aspects of life, from restrictions on social lives, to businesses going into administration. Even though the UK economy is now experiencing a period of positive growth, mainly due to the pace of the vaccination programme, the financial impact of the pandemic is still very visible.

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Shortly after the first lockdown restrictions came into place, lenders were quick to tighten their lending criteria, to try and protect themselves from the expected risk of higher unemployment levels and people struggling to pay off mortgages and loans.

Commercial finance was affected in a similar way, with so many businesses being forced to close during lockdown, the commercial finance landscape lurched into unknown territory.

Many businesses were provided with financial support in the form of furloughing, business interruption loans and bounce back loans but others were unable to apply for these. Some lenders offered holiday payments for commercial finance, so there were numerous financial support options in place to try and help struggling businesses survive the pandemic.

Commercial Mortgages UK Adverse Credit and BTL

As an independent UK Commercial Mortgage Broker we carefully examine all the Buy-to-Let mortgage offers from leading whole of market lenders across the UK. You will benefit from low interest rates, lenient eligibility criteria and a simplified procedure. You also have the choice of Second Charge Mortgages, Adverse Credit Mortgages for individuals with crediting challenges, to straightforward Residential Mortgages for your own home.

With the reassurance of attractive Mortgage Protection Insurancee options, we also offer specialist mortgage broker services such as self-employed Contractor Mortgages, Expat Mortgages, home loans and Sharia Mortgages, to commercial Serviced Accommodation Finance from holiday homes to Property Investors, Developers and existing Homeowners.

Business Loan Applications – UK’s Changing Priorities

The priority for the government was to assist existing businesses, rather than helping new businesses to launch, which was highlighted by the financial support options that were made available. Startup loans were still available from some lenders but it was now harder for many would-be entrepreneurs to access loans.

In the UK, many people use startup business loans to buy the equipment and pay for other essentials when they start up a business. With the economic downturn, many lenders have withdrawn products from the market and tighter lending criteria was applied.

However, the Bank of England cut interest rates down to 0.1% which meant that some of the new business loan interest rates have been more attractive for startup business owners, but there is a more comprehensive set of lending criteria to enable lenders to manage risk in the unstable climate.

COVID Government finance support schemes for businesses

To assist existing businesses who had been adversely affected by coronavirus, the government introduced the following schemes to support cashflow during this challenging period:

Interest-Free Business and Commercial Loans

Coronavirus Business Interruption Loan Scheme (CBILS)

SME businesses have been able to access business interruption loans for lost revenue and cashflow disruptions. The CBILS was also made available to businesses whose growth requirement could not be supported under standard bank lending criteria. Under the scheme, businesses who had been adversely affected by the pandemic could apply for loans of up to £5million.

The first 12 months of the loan is interest-free and the interest rates after a year for the CBILS scheme were set by the lenders. Some lenders provided the loans with an interest rate as low as 1.4%, while at the higher end of the scale, some lenders were offering the loans with a 8.9% interest rate. Terms were available for up to 10 years.

To encourage more lending, the government also guaranteed loan repayments, with the borrower being fully liable for the debt.

Lenders were able to provide the following finance under the CBILS scheme:

  • Term loans
  • Overdrafts
  • Invoice finance
  • Asset finance

Bounce Back Loan Scheme (BBLS) SME and Sole Trader Businesses

The Bounce Back Loan was aimed to support smaller businesses and sole traders, to provide them quick access to financial support. The scheme allowed businesses to borrow between £2,000 and up to 25% of their turnover (to a maximum of £50,000). For the first 12 months, there is no interest to pay and following that first year a rate of 2.5% would be applied.

The maximum loan length for the BBLS was six years and this scheme also came with a guarantee to the lender from the government for the repayment, with the borrower remaining liable for the debt.

Pay As You Grow (PAYG) Business Support

For businesses who took out the BBLS, the option for PAYG was later introduced to provide further support, allowing:

  • An extension of the loan term from six years up to 10 years, remaining at 2.5% interest rate.
  • Reduction of monthly payments by paying interest-only for six months. This could be requested up to three times throughout the term of the loan.
  • A repayment holiday of up to six months, which was only available once during the term.

Other financial support provided to businesses included:

Job Retention Scheme – Paid in the form of grants to pay 80% of the salaries of furloughed employees.

New Restart Grants – A one-off cash grant of up to £18,000 for businesses re-opening from April 2021, including pubs, hotels, restaurants, gyms, salons and clubs.

Business Rates Holidays – Business rates were cancelled for all retail, leisure and hospitality businesses for the tax year 2020-21 and up to June 2021, with a discounted rate for the remainder of the tax year.

Recovery Loan Scheme – This has replaced the BBLS and allows businesses to apply for between £25,000 and £10m. The government has given lenders an 80% guarantee for these loan repayments.

There have also been other schemes for different types of businesses, some made available through local authorities.

Commercial Finance Landscape Has Changed – Conclusion

COVID-19 has completely changed the landscape for commercial finance, particularly as the government has been compelled to step in to help save businesses from closure or building up unmanageable debts.

Lenders have been able to provide loans under the schemes with the security of knowing that the repayments are guaranteed by the government, which has helped them to continue providing finance to businesses when the risk to them is extremely high.

The success of the UK vaccination programme has already had a significant impact on economic recovery in the UK and the combination of this, along with the support that the government has provided will certainly have saved many businesses which otherwise would have gone into administration.

Experts are predicting that over the next few years should hopefully see a shift back towards the type of commercial finance products that were available pre-COVID, albeit with stricter lending criteria until we see a full economic recovery.

Commercial Finance Network is a specialist Commercial Finance Broker offering all types of commercial finance to SMEs along with individual investors. Get in touch today via either our Contact Form or call us on 03303 112 646.

Commercial Business Finance – The Rise of AI In The Banking and Lending Circles

June, 2017 archives: “Artificial intelligence can help people make faster, better, and cheaper decisions. But you have to be willing to collaborate with the machine, and not just treat it as either a servant or an overlord,” says Anand Rao, PwC Innovation Lead, Analytics.

The quote neatly sums up our relationship with AI technology. Although we appreciate its potential, we feel edgy about its power and possibilities. However, despite this, it’s pervading our lives as consumers, whether we like it or not. Every time we receive a marketing email or product recommendation, we can be sure the algorithms have been at work and we are far from the random target.

Despite its image of being cautious and conservative, the banking industry as a whole appears to have had few qualms about adopting the technology – and it seems that, as consumers, we are happy with this. A mammoth survey of around 33,000 consumers by Accenture found that more than 70 percent of us would be willing to receive computer-generated banking advice. “Automated servicing can be the sole source of data from some customers, even when making complex decisions around products,” says the report.

One of the main uses of AI so far has been in customer service. Chatbots are becoming the de facto alternative to banking apps. This use AI to simulate conversion through written or spoken text. Just as Amazon has humanised its digital assistant by calling it Alexa, so has the Nordic banking group Swedbank created ‘Nina’. This chatbot is clearly popular; within three months of being deployed, Nina was averaging around 30,000 conversations per month.

However, this is the sharp end of AI – the human/machine interface mainly used in the consumer-facing world of retail banks. But how does – or will – AI play out in a commercial finance environment?

The business sector is understandably more cautious, prudent perhaps, about adopting new technologies until they have matured. But as millennials take up more senior roles in the commercial banking world, they will be increasingly pushing for the rich functionality they know as consumers to also be integrated into their working environment.

Today, we are seeing signs that adoption rates of AI-based technology are set to take off in business banking too. More and more banks are borrowing retail banking experience to build out their commercial and business strategies. But while the focus of its use in the retail banking world has mainly been for customer service and sales applications, in commercial banking, use cases (initially at least) are likely to be more around streamlining operational processes.

In a sense, AI as it stands today, in this environment is all about automation, about making processes faster and more efficient. And there are a raft of applications here where automation is having a hugely positive impact.

Take the introduction of digital expenses platforms and integrated payments tools, both of which have the potential to significantly improve a business’s approach to how it manages cash flow. By having an immediate oversight, through live reporting of all spending from business cards and invoice payments, as well as balances and credit limits across departments and individuals, businesses can foresee potential problems more quickly and react accordingly. All these services become even more powerful when combined with technologies like machine learning, data analytics and task automation.

We are already seeing growing instances of AI and automation being used to streamline payment processes in banks. Cards can be cancelled or at least suspended quickly and easily and without the need to contact the issuing bank, while invoices can also be automated, to streamline business payments. This means businesses can effectively keep hold of money longer and at the same time pay creditors more quickly. Moving beyond straightforward invoice processing, intelligent payment systems can be deployed to maximise this use of company credit lines automatically.

Looking ahead, we see a string of applications for AI in the payments management field around analysing data with the end objective of spotting anomalies in it. With the short and frequent batches of payments data used within most enterprises today, it is unlikely that even the best-trained administrator would be able to spot transactions that were out of the normal pattern. The latest AI technology could be used here to tease out anomalies and pinpoint unusual patterns or trends in spending that could then be investigated and addressed.

While this area remains in its infancy within the banking and financial services sector, with technology advancing, financial services organisations and the enterprise customers they deal with will in the future will be well placed to make active use of AI that will help clients track not just what they have been spending historically but also to predict what they are likely to spend in the future. AI will ultimately enable businesses to move from reactive historical reporting to proactive anticipation of likely future trends.

Source: Russell Bennett, chief technology officer, Fraedom

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Halifax: House prices reach record high

UK house prices rose by 1.7% in September, equating to an increase of £4,400 to the value of the average property, according to the latest Halifax House Price Index.

This means that UK house prices are now at a record high of £267,500.

This month-on-month rise is the strongest increase since February 2007 and ups year-on-year house price inflation up to 7.4%.

This also reversed the recent three-month downward trend in annual growth, which had peaked at an annual rate of 9.6% in May.

Wales continued to record the strongest house price inflation of any UK region or nation, with annual growth of 11.5% in September (average house price of £194,286).

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Scotland also continues to outperform the UK national average, with growth of 8.3% (average house price of £188,525).

In both nations, the equivalent stamp duty holidays came to an end at an earlier date.

The South West remained the strongest performing region in England, with annual house price growth of 9.7% (average house price of £276,226).

The North West saw the next biggest increase, with house prices up by 9% year-on-year (average house price of £201,927), marginally ahead of Yorkshire and Humber at 8.9% (average house price of £186,815).

The weakest performing regions in terms of annual house price inflation are all to be found in the South and East of England, though these are also the areas with the highest average UK house prices.

Eastern England has seen annual growth of 7.2% (average house price of £310,664) while in the South East it is 7% (average house price of £360,795).

Greater London remains the outlier, with annual growth of just 1% (average house price of £510,515), and was again the only region or nation to record a fall in house prices over the latest rolling three-monthly period (0.1%).

Russell Galley, managing director of Halifax, said: “While the end of the stamp duty holiday in England – and a desire amongst homebuyers to close deals at speed – may have played some part in these figures, it’s important to remember that most mortgages agreed in September would not have completed before the tax break expired.

“This shows that multiple factors have played a significant role in house price developments during the pandemic.

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“The ‘race-for-space’ as people changed their preferences and lifestyle choices undoubtedly had a major impact.

“Looking at price changes over the past year, prices for flats are up just 6.1%, compared to 8.9% for semi-detached properties and 8.8% for detached.

“This translates into cash increases for detached properties of nearly £41,000 compared to just £6,640 for flats.

“Against a backdrop of rising pressures on the cost of living and impending increases in taxes, demand might be expected to soften in the months ahead, with some industry measures already indicating lower levels of buyer activity.

“Nevertheless, low borrowing costs and improving labour market prospects for those already in employment are likely to continue to provide support.

“Perhaps the biggest factor in determining the future of house prices remains the limited supply of available properties.

“With estate agents reporting a further reduction in the number of houses for sale, this is likely to underpin average prices – though not the recent rate of price growth – into next year.”

Mike Scott, chief analyst at Yopa, added: “The Halifax House Price Index for September shows that there was a large monthly increase in house prices as we reached the final end of the stamp duty holiday, with average prices up by 1.7% for the month and the annual rate of increase rising to 7.4%.

“The mortgage approvals included in the September figure largely relate to purchases that will complete in later months and not benefit from any tax saving, so this is in effect already a post-tax-holiday figure.

“It is therefore further evidence that the withdrawal of the tax savings will have little effect on the over-heated housing market, which is still being driven by a severe shortage of homes for sale, good mortgage availability at record low interest rates, strong wage growth, pandemic-induced lifestyle changes and the involuntary savings built up by many during the lockdowns.

“Yopa thus expects the current strong rate of price growth to be maintained into at least the first half of 2022 as we continue to recover from the pandemic and return to a new normal.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Although reflecting some historical buying and selling, the housing market continues to demonstrate remarkable resilience bearing in mind the number of transactions brought forward in the last few months to take advantage of the stamp duty holiday.

“Nevertheless, we are finding activity has lost some oomph but there is still plenty of life left, supported by record low interest rates and supply, while though rising, is not doing so fast enough.

“The market also seems to be shrugging off rising inflation and the end of furlough, as well as widening economic concerns.”

August saw the average cost of a property reach £262,954, up 0.7% on July and the then highest figure on record.

By Jake Carter

Source: Mortgage Introducer

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The UK’s Top Property Investment Hotspots

A new independent survey of more than 500 property investors has uncovered the UK’s top property investment hotspots for the coming year:

  • 44 per cent of UK property investors intend to expand their property portfolio in the coming year
  • London continues to dominate as an investment hotspot – 40 per cent of investors plan to buy in the capital
  • West Midlands (32 per cent), East of England (26 per cent), South West (19 per cent) and East Midlands (17 per cent) complete the top five
  • 44 per cent have become more inclined to invest in rural areas since the start of the pandemic

London remains the primary focus among UK property investors, according to new research from FJP Investment.

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The investment firm commissioned an independent survey among 512 UK investors, all of whom own two or more properties in the UK. It found that nearly half (44 per cent) intend to expand their property portfolio in the coming year, with 42 per cent citing real estate as the main focus of their investment strategy at present.

Among those planning on purchasing a property in the next 12 months, London emerged as the UK’s leading investment hotspot, with 40 per cent considering investing in the capital.

Behind London, the West Midlands and East of England ranked second and third, with 32 per cent and 26 per cent of investors respectively inclined to purchase a property in these regions.

The South West came fourth (19 per cent), closely followed by the East Midlands (17 per cent).

FJP Investment’s research also found 44 per cent of UK property investors have become more inclined to consider investing in properties in rural areas since the start of the pandemic.

Jamie Johnson, CEO of FJP Investment, said: “The stamp duty holiday has clearly played a part in boosting activity in the property market and with the worst of the pandemic hopefully behind us and investor confidence returning, it is positive to see that property portfolio expansions are high on investors’ agendas for the coming year.

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“Tellingly, London has retained its crown as an investment hotspot, despite speculation throughout the pandemic that the city may have lost its appeal as a place to live, work and invest. Yet our research also shows that regions such as the West Midlands and East of England rank high among investors’ wish lists, and we should expect these areas, along with the likes of the North East and North West, to attract high level of property investment in the coming years.”

The UK’s Property Investment Hotspots
RegionPercentage of property investors considering this region for their next purchase
London40 per cent
West Midlands32 per cent
East of England26 per cent
South West19 per cent
East Midlands17 per cent
Yorkshire and Humberside16 per cent
Scotland15 per cent
South East15 per cent
North West13 per cent
North East9 per cent
Wales5 per cent
Northern Ireland5 per cent

Source: Property Wire

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Rental demand in cities up 9.9% in Q3

Rental demand has risen 9.9% in Q3 across the UK’s major cities, according to research estate and lettings agent Barrows and Forrester.

The analysis of 23 major UK cities found that rental demand averaged 42.9% during the third quarter of this year, a 9.9% increase on the previous quarter and 6.8% higher than this time last year.

Cardiff and Glasgow saw the largest quarterly uplift, with rental demand climbing by 22.1% in both cities.

Bristol (21.9%) and Edinburgh (21.5%) also saw tenant demand lift by more than 20% in Q3, with Cambridge completing the top five (19.6%).

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Other cities to make the top 10 included Manchester (14.8%), Newcastle (11.2%), Southampton (10.9%), Plymouth (10.8%) and Birmingham (10.5%).

Newport was the only city to have seen a decline in demand in Q3, down 5.2% on the previous quarter.

Five cities saw demand in Q3 drop below the levels seen this time last year: Belfast (40.9%); Nottingham (3.5%); Portsmouth (3.3%); Liverpool (2.9%); and Plymouth (0.4%).

James Forrester, managing director of Barrows and Forrester, said: “There have been numerous indicators of late that the UK rental market is starting to once again find its feet after one of the most difficult periods in recent times.

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“The demand for city rental homes, in particular, was heavily impacted during the pandemic and as a result, many landlords were forced to stomach a significant decrease in rental income in order to secure a tenant.

“However, this is starting to change and we’re seeing a notable uplift in demand for rental properties across many of the nation’s major cities.

“We expect to see a further boost over the coming months as many tenants look to secure a property ahead of the new year and a fresh start.”

By Jake Carter

Source: Mortgage Introducer

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Goodlord: Average rental cost reaches a year-to-date high

The average cost to a rent a property has reached a year-to-date high of £1,104, according to the latest Rental Index from Goodlord.

Overall, rents in September were found to be 6.94% higher than in September 2020.

The North West has seen a significant increase in the average cost of a rental property, with prices rising by 11% – from £807 to £901.

London also recorded a 2.5% increase, taking the cost of a rental property in London from £1,725 to £1,770. The West Midlands recorded a 1.5% rise.

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However, the East Midlands, North East, South East and South West all recorded decreases in the cost of rent, ranging from 1% to 5%.

After five months of diminishing void averages across England, September saw an end to this trend.

There were increases in void periods in all regions monitored, with the exception of Greater London.

However, the average void period across England is still only 17 days, lower than the averages recorded between January and May of this year.

Overall, void periods remain 10.5% lower year on year.

The biggest jumps were seen in the North East and the North West. The North East recorded a 37.5% increase in the average void period, moving from eight days in August to 11 days in September.

Despite this, the region continues to have the lowest void periods overall, a title it has held for three consecutive months.

The North West saw voids increase by 38%, taking averages from 18 days to 25 days. This makes it the region with the highest overall void periods.

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Greater London saw void periods reduce from 13 days to 12, the only reduction recorded.

The average income of an English renter also rose during September. Salaries jumped up from an average of £25,264 in August to £26,764 last month – an increase of 5.9%.

The average age of an English renter has also increased, rising to 34 years old. This compares to the average renter in August, who was 32.

Tom Mundy, chief operating officer at Goodlord, said: “The year on year trends for the rental market are hugely encouraging.

“The void and rental averages in September 2021 compared to last year show just how strongly the market has rebounded.

“Rents are currently very high, on average, and void statistics continue to be lower than we’d expect, which sets the market in very good stead ahead of the winter months.”

By Jake Carter

Source: Mortgage Introducer

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Rightmove: Total savings from stamp duty holiday estimated at £6.1bn

The total savings people have made by purchasing properties during the stamp duty holiday has been estimated at £6.1bn, according to data collected by Rightmove.

With the tax holiday drawing to a close, Rightmove has estimated that one million households benefitted from a stamp duty saving since the incentive was introduced in July 2020.

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As well as this, buyer demand in England is 43% higher than in September 2019.

Meanwhile, HMRC has revealed that stamp duty receipts have continued to decline.

Tim Bannister, property expert at Rightmove, said: “Around a million households made tax savings since last July, which provided some people with an added incentive to move, especially in the higher price brackets.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

“We’re still seeing much higher levels of demand for homes than in 2019 so it’s clear there have been a number of other reasons for making this summer the time to move to a new home.

“There are still savings to be had for first time buyers, so this hasn’t signalled the end of savings altogether and we’re expecting the market to stay busy for the rest of the year and into next year.”

By Jake Carter

Source: Mortgage Introducer

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Annual house price growth slowed to 10% in September

Annual house price growth eased to 10% in September, from 11% in last month, according to the latest house price index from Nationwide.

On a monthly basis, house prices rose by 0.1%, after taking account of seasonal effects. As a result, house prices remain 13% higher than before the pandemic began in early 2020.

Wales was the strongest performing region with house prices up 15.3% year-on-year, the highest rate of growth since 2004.

Price growth remained elevated in Northern Ireland at 14.3% and growth in Scotland picked up to 11.6% in Q3, in contrast to the previous quarter when it was the weakest performing part of the UK at 7.1%.

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England saw a slowing in annual house price growth to 8.5%, from 9.9% in Q2. Price growth in northern England continued to exceed that in southern England.

Yorkshire & Humberside was the strongest performing English region for the second quarter in a row, with prices up 12.3% year-on-year, followed by the North West, which saw an 11.4% rise.

London was the weakest performer, with annual growth slowing to 4.2% from 7.3% last quarter. The surrounding Outer Metropolitan region, which includes places such as Luton, Watford, Sevenoaks and Woking, also saw a softening to 6.8%, down from 8.2% in Q2.

Robert Gardner, chief economist at Nationwide, said: “House prices have continued to rise more quickly than earnings in recent quarters, which means affordability is becoming more stretched.

“Raising a deposit remains the main barrier for most prospective first-time buyers. A 20% deposit on a typical first-time buyer home is now around 113% of gross income, a record high.

“Due to the historically low level of interest rates, the cost of servicing the typical mortgage is still well below the levels recorded in the run up to the financial crisis. However, even on this measure, affordability is becoming more challenging.

“For example, if we look at typical mortgage payments relative to take home pay across the country, it is notable that in the majority of UK regions (10 out of 13) this ratio is now above its long-run average. By contrast, pre-pandemic, this was only the case in one region (London).

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

“Recent price patterns suggest an element of rebalancing is occurring where most of the regions that have seen the strongest price growth are those in which affordability is still close to or below the long run average.

“As we look towards the end of the year, the outlook remains uncertain. Activity is likely to soften for a period after the stamp duty holiday expires at the end of September given the incentive for people to bring forward their purchases to avoid the additional tax.

“Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises as government support winds down, as seems likely.

“But this is far from assured. The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic – such as wanting more space or to relocate – to continue to support activity for some time yet.”

Sundeep Patel added: “With the modest slowdown in annual house prices to 10.0% in September, from 11.0% in August, it’s widely felt UK house prices peaked at the height of Summer and will now start to stabilise as we move into the Autumn.

“Government support and tax reliefs certainly helped to inflate house prices this year and in some areas demand is still at record levels.

“However, with stamp duty and furlough winding up, and the Bank of England deliberating to whether to raise interest rates, the bubble created by frenzied property buying is soon likely to pop.

“That said, demand for buy-to-let has been on the rise in certain regions lately as property investors bid to capitalise on local prices doing well in the post-pandemic market.

“Even with the prospect of activity calming, there will be a widening gap for specialist lenders to cater to the ever-changing financial needs of borrowers.”

Nigel Purves said: “Whilst there was a slight cooling in house price growth, house prices remain far higher than before the pandemic – causing major affordability issues for aspiring homeowners.

“With the stamp duty holiday drawing to a close and the government’s pandemic support coming to an end, most would-be buyers don’t have an easy road ahead.

“Average deposits are sat at £60,000, and strict lending criteria mean that the low mortgage rates aren’t available or accessible for most people.

“If we’re going to see real and lasting change for the UK’s reluctant renters, there needs to be focus on a pushing the market to adopt a more flexible, innovative, and realistic approach that will help a greater number of people take their first step onto the ladder.”

By Jake Carter

Source: Mortgage Introducer

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UK housing market still steaming despite looming stamp duty break cut off

The looming end of a watered down tax break on house purchases has not cooled the UK’s rampant housing market, according to official figures released today.

Brits took on £21.5bn in mortgage debt last month, up sharply from July’s figure of £16.6bn, shows Bank of England data.

A record low interest rate environment has propped up demand in the housing market as Brits rush to lock in cheaper mortgages.

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However, the prospect of rates rising on mortgages is strengthening. The Bank of England signalled last week it has seen strong progress in the UK economy that may prompt it to tighten monetary policy soon.

The watered down stamp duty holiday will end tomorrow, possibly triggered a sharp correction in demand in the property market.

The pandemic has engineered a shift in consumer preferences toward favouring larger houses with access to green space, often outside cities. These properties typically require a larger mortgage to buy.

Martin Beck, chief economic advisor to the EY ITEM Club, said: “There could be another rise in net lending in September, as buyers again race to complete before the tax cut ends.”

Gross mortgage lending remained high despite the number of mortgage approvals ticking down over the last month, dropping to 74,500 in August from 75,100 in July.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Net of repayments, Brits took on £5.3bn in mortgage debt, following a rare net repayment of mortgage debt in July.

Credit card lending rose £200m in August, but this figure was significantly below its pre-pandemic average, according to Tom Pugh, economist at RSM UK.

“With energy price hikes, tax rises and higher fuel costs all eating into household’s disposable income, consumer spending may be about 1 per cent lower in 2022 than we had previously thought,” he said.

Households added a further £9.1bn into savings accounts, a trend that has accelerated ahead of its long term average during the pandemic as Brits saved money that would have been spent if lockdowns had not been imposed.

By Jack Barnett

Source: City AM

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Renters return: London rental market makes up 4.3 per cent of city GDP

Around £21.4bn is generated in rental income in London alone, which equates to some 4.3 per cent of the city’s GDP according to new research.

The research, from Sequre Property Investment, found that – unsurprisingly – the capital topped the list as the region with the highest rents and the most privately rented homes.

Across the UK, the average tenant pays £12,636 in rent each year, equating to total rental income in excess of £69.4bn across the 2.2m privately rented homes, worth 3.2 per cent of the country’s total GDP.

The figure could have been higher had landlords not dragged rent prices down to entice people back to the capital after pandemic restrictions led to an exodus.

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“Pre-pandemic, at the beginning of 2019, the rental market was in a very strong position. The demand was strong. There was probably a shortage of good stock, so demand was slightly outweighing supply,” Richard Davies told City A.M.

When the pandemic hit, the market was “flooded with properties” as people drifted to grassier pastures.

Which led to more short-let properties going into long-term market, as AirBnB owners turned their holiday properties into homes as tourists and travellers dried up.

Tenants were also found to be agreeing to longer contracts, as to lock in with lower, pandemic-era prices.

Though rents appear to be rebalancing at pre-pandemic levels, Davies explained, rental supply is still reduced.

Since the third quarter of this year, rents have begun to climb again and are back up to 2019 levels and in some areas, maybe slightly higher, he said.

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Davies expects the trend to continue through to end of the year, which he says is ”great news for landlords” after a particularly tough year.

The director of London-based estate agent, Benham and Reeves, Marc von Grundherr agreed, as easing restrictions have given way to an influx of demand for city life once again.

“London remains the beating heart of the private rental sector both in terms of the sheer number of rental properties and the income generated from them,” he said.

“The end of lockdown restrictions and a return to the workplace have already rejuvenated demand and we expect the market to be firing on all cylinders before the year is out.”

By Millie Turner

Source: City AM

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UK house prices forecast to rise by up to 3.5% a year between 2022 and 2024

Hamptons has released its housing market forecast for next year and beyond, predicting that property price growth will remain above pre-pandemic levels as the cycle ends in 2024.

The company believes that summer 2021 marked peak house price growth. As we move into autumn and winter they expect price growth to slow, ending the year at 4.5% across Great Britain.

It says that a second wave of lockdown-induced demand will keep price growth in positive territory at 3.5% in 2022, 3% in 2023 and 2.5% in 2024.

London is set to underperform the rest of the country until the house price cycle ends in 2024. They forecast prices in the capital to end the year up 1.5% and then rise by 1.0% in 2022, 1.5% in 2023, before accelerating to 3% in 2024.

The North East will be the top performer over the next four years. Hamptons expect house prices to rise 21.5% in Q4 2024, outpacing the Great Britain average of 13.5%.

A record-breaking first half of the year means that more homes will have sold in 2021 than in any year since 2007. The property firm forecast 1.5 million completions in Great Britain in 2021.

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Covid-19 induced changes mean households will make more moves than pre-pandemic times. It is forecast that transactions will fall marginally to 1.25 million in 2022 before reaching a new normal of 1.3 million in 2023 and 2024.

The rapid pace of rental growth will slow. They expect rents in Great Britain to end the year up 3%, before slowing to 2.5% in 2022 as affordability bites.

By the end of 2024 Hamptons expect rents to have risen by 10.0%, led by Southern regions. Meanwhile, London will lag until growth accelerates in 2024.

Aneisha Beveridge, head of Research at Hamptons, said: “The housing market has confounded expectations and forecasts in past months. Back in the autumn of 2020, such were the economic challenges being faced that we could not have envisaged the extraordinary demand for relocation which we have seen this year. But there has been a huge attitudinal change towards property, which cannot be attributed to the stamp duty holiday alone.

“People now place a higher value on their homes, having have spent more time in them than ever before. Flexible and remote working, which look set to continue, have encouraged households to make bigger moves. As a result, more homes are likely to have been sold in 2021 than in any year since 2007. This is why we also think housing activity will surpass pre-pandemic times in 2022 and beyond.

“The pandemic has accelerated the closing of the house price gap between London and the rest of the country. Even so, we still expect London to underperform the rest of the country until 2024, when the cycle is likely to end. While we will see a degree of levelling up over the next few years, the gap between house prices in the capital and the other regions is likely to be wider than that seen at the end of the previous cycle in 2007. And this divergence will set the pattern for future performance.”


Hamptons believe that summer 2021 marked peak house price growth across Great Britain, which is now expected to slow…

It says that the property market remains resilient as the stamp duty holiday draws to a close, but expects price growth to soften towards the end of the year.

The latest ONS data shows that residential property prices across Great Britain rose by 8% in the 12 months to July, down from a peak of 13.2% in June. The end of the stamp duty holiday combined with the fact that house prices were already recovering at the end of last year means they expect price growth to soften to 4.5% by Q4 2021. The average price of a home in Great Britain will end the year around £258,000, a similar level to July 2021.

While growth will slow as the year draws to a close, 2021 will remain a strong year for price appreciation, compared with the performance of recent previous years.

Scotland is set to the see the strongest price growth in Q4 2021 (7%), followed by the North East (6.5%) and Wales (5.5%). The average price of a home in the North East passed its pre-financial crisis peak for the first time this year.

Stretched affordability and the rise of flexible working have encouraged households to leave the capital, making London the weakest performing region. That said, Hamptons expect house prices in the capital to end the year up 1.5%, led by Outer London. The South East has been the biggest beneficiary of London outmigration. Here prices are expected to rise 5.0% in Q4 2021 compared with the same time last year.


A second wave of lockdown-induced demand will keep price growth above pre-pandemic levels at 3.5% in 2022…

The estate agency says that a desire for more space and the flexibility for workers to split their time between the home and office will continue to stimulate the market in 2022. Equity-rich homeowners have dominated property market activity since the start of the pandemic, but they expect a second wave of lockdown-induced demand from those who have been unable to move this year.

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Hamptons expect mortgage rates for all borrowers to hit rock bottom in 2022 which will boost affordability, particularly for first-time buyers using bigger mortgages who saw rates soar during the early days of the pandemic.

House prices are forecast to rise by 3.5% across Great Britain in Q4 2022, in line with incomes. Price growth will be strongest in the Northern Regions, alongside Wales and Scotland, where affordability constraints are lower. Next year they expect the North East to record the strongest price growth (6.0%) followed by Scotland, Wales, Yorkshire & the Humber and the North West at 5%. Meanwhile, London will continue to see the weakest growth at 1%.


The North will drive growth of 3% in 2023 as we approach the end of the regional cycle…

The economic recovery will determine the medium-term outlook for the housing market, with income growth and the pace of interest rate rises being particularly crucial to the direction of house prices. If interest rates increase more rapidly than expected, this will dent affordability and put a dampener on price growth.

However, the combination of an economic recovery and the enhanced importance of homes should keep activity above that of the pre-pandemic era. Hamptons forecast prices in Great Britain to rise 3% in Q4 2023.


The cycle is likely to come to an end, but prices across the regions will be more widely spread than ever…

Typically, a house price cycle lasts around 16 years. The cycle usually begins with price growth in London steaming ahead, as it did between 2008 and 2016. This tends to be followed by a narrowing of the price gap between London and the regions as prices in the North catch up.

In the final year of a cycle, there are often signs of prices in London accelerating. And they expect this to be the case in 2024, with London house prices forecast to accelerate from 1.5% in Q4 2023 to 3.0% in Q4 2024.

However, the gap between London and the rest of the country is set to remain wider than at the end of previous cycles. With house prices in London forecast to rise by 7.0% over the next four-years, by the end of 2024 Hamptons expect the average home in the capital to cost 87% more than the national average. At the beginning of the house price cycle in 2008, the gap stood at 59%, rising to a peak of 117% in 2016.

Hamptons forecast the North East to see the strongest price growth over the next three years, with prices here expected to rise by 21.5%. But by 2024, the average price in the region will remain 41% below the national average, unless economic growth in the region picks up pace.

A new cycle begins…

Historically, the beginning of a new house price cycle has been synonymous with a sharp price correction. However, Hamptons do not expect this to be the case this time. A low interest-rate environment, tighter lending criteria coupled with the fact there’s been considerably less house price growth over the last 16 years means we’re more likely to see a continuation of modest price growth, such as we’ve witnessed during the last five years, rather than a boom followed by a bust.

To put this into context, between 1976 and 1991 house prices across Great Britain grew by 466%; between 1992 and 2007 they rose 265%; but between 2008 and 2024 we expect house prices to rise by 61%. This means a period of more balanced price growth across the regions as a new cycle dawns.

Regional house price forecast (Q4 of each year)

20202021 (F)2022 (F)2023 (F)2024 (F)4 Year Forecast
Greater London4.0%1.5%1.0%1.5%3.0%7.0%
East of England4.3%4.0%2.5%2.5%2.0%11.0%
South East4.7%5.0%3.0%2.5%2.0%12.5%
South West6.9%3.0%3.0%2.5%2.5%11.0%
East Midlands6.8%4.0%4.0%3.0%2.0%13.0%
West Midlands6.2%5.0%4.0%3.0%2.0%14.0%
Yorkshire & Humber7.5%4.0%5.0%4.0%3.0%16.0%
North West8.5%4.5%5.0%4.0%3.0%16.5%
North East6.2%6.5%6.0%5.0%4.0%21.5%
Great Britain6.1%4.5%3.5%3.0%2.5%13.5%
Source: ONS & Hamptons


Covid-19 induced changes mean households will make more moves than pre-pandemic

A record-breaking first half of the year means that more homes will have sold in 2021 than in any year since 2007.  We expect an increase in completions in September, as the stamp duty holiday comes to an end, but activity looks set to moderate as the year draws to a close.  By the end of 2021, we forecast 1.5 million homes to have been sold across Great Britain (chart 2).

In 2022, activity will be supported by households who have been unable to move home in 2021 as a result of affordability pressures, job uncertainty, or because they could not find a suitable property.

First-time buyer numbers should increase next year as the rates on higher-loan-to-value mortgage deals become cheaper.  We forecast there to be 1.25 million transactions across Great Britain in 2022, 17% fewer than 2021, but 22% more than in 2019 (chart 2).  This is a smaller hangover than after previous stamp duty holidays.

Thanks to a growing economy and low-interest rates, transactions will reach 1.3 million in 2023 and 2024 (chart 2).  As people spend more time in their homes and as a consequence are on the hunt for space, we expect transactions to remain above pre-pandemic levels.

Rental Growth

The rapid pace of growth is expected to slow

We forecast that the rapid pace of growth in the rental market will slow in 2022.  But the rate of increase should still be above pre-pandemic levels, supported by tenants’ willingness to pay for extra space and by unprecedentedly low levels of stock.

We forecast that rents will rise by an average of 2.5% in 2022 across Great Britain, following an increase of 3.0% this year (chart 3).  Growth will be dictated by what happens to peoples’ incomes in 2023 and 2024.

Growth is likely to be slower in the capital, particularly in Inner London where rents may not return to pre-pandemic levels until the middle of 2022.  We are forecasting overall rental growth in London of 0.5% this year, with pickup to 1.0% in 2022 and 1.5% in 2023.  Rental growth is then expected to accelerate to 3.5% in 2024 (chart 3).

The regions outside London, where affordability is less stretched, will see stronger growth.  Rents seem set to move in similar directions, with no significant North-South divide.  The South is likely to see marginally stronger growth, with rents here forecast to rise 14.5% by the end of 2024.


Source: Property Industry Eye

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BTL availability reaches highest level since 2007

September started with 2,968 products on offer in the buy-to-let (BTL) sector, making BTL availability the highest on Moneyfacts records since October 2007 (3,305).

This is 71 products more than there were on offer pre-pandemic in March 2020 (2,897).

The average overall 2 and 5-year fixed BTL rates reduced in September by 0.03% and 0.04%, respectively.

At 2.94%, the 2-year fixed average was the lowest since January (2.89%), and at 3.25% the 5-year fixed equivalent was the lowest since December 2020 (3.25%).

At 85% loan-to-value (LTV), BTL availability remained unchanged at just 19 products this month, 13 less than were available in September 2019.

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The average 2 and 5-year fixed rates in this bracket of 5.61% and 5.83% were 0.88% and 0.44% higher than what was on offer two years ago.

Eleanor Williams, finance expert at Moneyfacts, said: “As we pass the 25th anniversary of the first BTL mortgages as we know them, our data gives landlords cause for positivity, as the number of products for them to choose from has risen by 153 this month, and at 2,968 is 1,162 higher than this time last year (1,806 Sep 2020).

“The resilience of this sector in the aftermath of a challenging 18-months is clear as choice now exceeds the number of deals available before the pandemic in March 2020 by 71 options.

“Further cause for celebration is that the interest charged on BTL mortgages is falling, with the average overall 2 and 5-year fixed rates dropping by 0.03% and 0.04% this month, to 2.94% and 3.25% respectively.

“Compared to a year ago, on face value borrowers will notice average rates are higher today.

“However, the rates a year ago were driven by the impact of the pandemic and product availability was low – particularly in the higher LTV tiers where rates are generally higher due to pricing for risk.

“As it stands, compared to a pre-pandemic September 2019, both the average 2- and 5-year fixed BTL rates are lower by 0.03% and 0.19% respectively, indicating rate pricing competition for those looking for new finance for an investment property.

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“As rental demand remains high, BTL could be a worthwhile investment and the rise in overall product choice and fall in average rates is positive.

“However, a note of caution as lenders’ enthusiasm to improve ranges seems to dissipate at the top end of the BTL LTV spectrum.

“The maximum 85% LTV bracket has not only seen availability stall at 19 deals, but also the average two- and five-year fixed rates on offer for landlords with just 15% equity or deposit are a quite staggering 0.88% and 0.44% above their September 2019 equivalents, indicating that while lenders are competing for business, this eagerness does not seem to extend to the riskier end of the market yet.”

By Jake Carter

Source: Mortgage Introducer

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