Securing debt amongst most searched in second charges – latest Knowledge Bank Tracker results reveal
New research from criteria search specialist Knowledge Bank shows 2021 looks set to be another year of change in the mortgage market. Knowledge Bank recorded a record 52,000 criteria changes in 2020, and this January had another 3,000 changes.
Knowledge Bank is the largest database of mortgage lending criteria held anywhere in the UK, and the monthly criteria index shows the terms that brokers are actually searching for, which may well be reflected in mortgage completions in two-or three-months’ time.
The second charge market saw the biggest shift in January. Out of the four new terms in the top five, three related to managing or consolidating debt, including those with CCJs looking to second charge loans for finance. This demonstrates that a number of people are struggling financially and are using their homes to secure debt against. The one constant in January was ‘Maximum loan to value (LTV)’ which has been the top searched ‘second charge’ criteria since May 2019.
For the first time since August 2020, ‘Furloughed workers’ hit the top spot in the residential market again. This shows brokers were working with an increasing number of clients on the job support scheme, who were potentially struggling to get a mortgage. This became increasingly difficult in January as lenders have continued to restrict criteria for those on furlough.
Despite lenders returning to the 90% LTV market in force, searches for ‘Joint borrower sole proprietor’ reached the top five most-searched terms in residential criteria for the first time since February 2020. This suggests that, even though higher LTV products are back on the market, the Bank of Mum and Dad – or even grandad and grandma – is continuing to be essential for many people looking to get on the housing ladder. The support they require is probably due to the increasing cost of houses, as the average price paid by first-time buyers increased by 10% in 2020 to over £250,000 according to Halifax.
Some first-time buyers may be turning to buy-to-let to get a foot on the ladder. ‘First time buyers’ reached the top five search terms in the buy-to-let market for the first time since February 2020. This could be an option for those whose income is not high enough to afford a mortgage, but have a large deposit and want to invest in property. ‘First time landlord’ also remained in the top two most-searched terms for the eighth month in a row, showing interest in investing in property is not just restricted to first-time buyers.
‘Lending to limited companies’ was the top searched term in the buy-to-let market. This could well be due to a rush of landlords setting up companies before punitive tax changes take effect. Previously landlords, like every other business, could claim tax relief at the same rate as their income tax banding on mortgage interest payments. From April 2021, landlords will no longer be able to offset any of their mortgage interest against their tax.
In the bridging market, ‘development bridging’ made the top five for the first time since February 2019. The volume of searches for ‘Development Bridging – Maximum Loan to GDV LTV against End Value’ suggests there are people using bridging loans for major redevelopments. ‘Commercial Owner Occupier’ entered the top five in the commercial arena, potentially to raise funds which then can be re-invested into the business.
Matthew Corker, operations director at Knowledge Bank, commented, “As we move into 2021, the mortgage market continues to shift dramatically. There is significant interest in debt consolidation in the second charge market, while the buy-to-let sector continues to attract interest from both potential and existing investors.
“The furlough scheme is at the top of brokers requests in the residential category as thousands of families are, or have now been, affected by being on furlough. Just how supportive lenders will be of those that have been on the scheme is still being established. On the positive side, support from families appears to be helping buyers onto the ladder. This trend looks set to continue despite 90% LTV mortgages coming back to the market, as the average price for first-time buyers continues to rise.
“With the end of both the stamp duty holiday and furlough scheme, lenders are certain to continue 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.”