Furlough and footprints flavour of the month – latest Knowledge Bank Tracker results reveal
New research from criteria search specialist Knowledge Bank in November shows the mortgage market is still changing at a rapid pace, as the pandemic continues to create waves. As the largest database of mortgage lending criteria held anywhere in the UK, Knowledge Bank’s monthly criteria index shows the criteria that brokers are actually searching for.
‘Furloughed workers’ came back into the top five most searched terms by brokers in the residential mortgage market. The searches surged, as a result of the Chancellor announcing an extension to the job support scheme on 5th November. Lenders reacted quickly, with over 30 updates to criteria in just two days recorded by Knowledge Bank in its ‘Furloughed Workers’ category. Unfortunately for borrowers, most lenders tightened criteria for those who had been furloughed at any time, making it harder for them to buy or to remortgage.
For the first time in over a year the term ‘Soft footprint at Decision in Principal (DiP) stage’ was among the top five most searched for criteria by brokers. This is potentially as a result of brokers looking to apply to multiple lenders due to tightening criteria. Or, as speed is of the essence, brokers may also be looking to multiple lenders so the client can secure a purchase in time for the stamp duty holiday. Using a soft footprint DiP could also suggest that more clients with lower credit scores are applying and don’t want the search process itself to lower the success of an application.
In the rest of the top five residential searches, interest continued in the Help to Buy scheme. The scheme has appeared in the top five searches every month since April. Now, with the scheme closing to applications on 15th December, there is a huge urgency for brokers looking to help their clients to secure a mortgage before the deadline. The successor scheme will come in from 16th December, however the new version includes regional caps and is limited to first-time buyers only.
In the buy-to-let market the trend for investing in property continued as ‘First-time Landlords’ was the top searched term for the third month in a row. With the stock market still volatile, property has remained a stable investment and the continued interest in buy-to-let demonstrates this. Some people are using buy-to-let to get on the housing ladder if they cannot afford a residential mortgage, whilst still staying with family or in rental accommodation themselves.
The second highest searched buy-to-let term was ‘Lending to Limited Companies’. This trend is as a result of measures from 2015 that reduced mortgage interest relief for landlords holding property in their personal names. The tax relief for landlords with property in their name has been gradually declining since 2015 and was fully removed in April this year. ‘Holiday lets’ re-entered the top five after a month-long hiatus, potentially as a result of the second lockdown causing more interest in ‘staycations’.
In the bridging arena, for the first time ever, ‘First Time Bridgers’ entered the top five most searched for terms. In what is good news for the bridging industry, this could be a result of the stamp duty holiday deadline beginning to loom on the horizon. With buyers fearful of missing out on a significant tax saving if they don’t complete their purchase by 31st March, there is likely to be an increase in buyers looking to bridging loans to get their purchase over the line. Bridging loans often complete much more quickly and the buyer would then look to remortgage after April.
Maximising LTV has been of interest to borrowers across the mortgage spectrum. ‘Maximum LTV / Loan to Value’ was the top searched criteria in second charges, self-build, bridging and was the second highest searched in the commercial sector. This trend illustrates lenders’ criteria is still tight and borrowers are looking to capitalise on the stamp duty holiday, even if they don’t have a 15% deposit. Lenders are slowly moving their LTVs back to pre-Covid levels however, with the very positive news of ten lenders increasing their LTVs up to 85-90% in November.
Matthew Corker, lender relationship manager at Knowledge Bank, commented, “The only constant at the moment is change. With the furlough scheme back, discussions around an extension to the stamp duty holiday and record numbers of mortgage approvals, the property sector continues to move at a rapid pace.
“Some trends are continuing, with max LTVs again being a hot topic. Lenders are responding and in November, many LTVs were gradually increased back to pre-Covid levels. However, an increase in new broker searches such as soft footprint DiP and ‘First Time Bridgers’ shows how the market is constantly changing.
“Lenders are constantly adapting criteria to keep up with the evolving market. It is now physically impossible for any mortgage broker to keep all the different criteria in their heads. So, it is now more important than ever for brokers to use a comprehensive criteria search system to ensure they can provide their clients with best advice – and evidence that they have done so.”