The mortgage market works only because of deadlines being met. You might say the whole process is a series of deadlines and when you also throw into the mix a stamp duty holiday deadline, you certainly up the ante in terms of completion pressure and everything that comes with that.
As we work through the next couple of months, the 31 March deadline will get ever closer, and as a lender we’re acutely aware of what will be at stake for both advisers and their clients. We’ve upped our resources specifically in our completion teams in order to help as many clients as possible complete before the deadline and secure the stamp duty saving available.
At the time of writing, no extension of the stamp duty reduced rates period has been announced, and we have to work on the basis that it won’t be forthcoming.
Historically, the good news is that while we’ve had stamp duty deadlines in the past, for example, back in 2016 when stamp duty for additional property was to be raised 3%, there was no extension offered however – at least according to my memory – there were also no great swathes of missed completions. Let’s hope for the same this time.
Back in 2016 the conveyancing sector worked admirably, because there was undoubtedly a bump in activity by landlords bringing forward their purchases so they wouldn’t have to pay the extra charge.
Whether we can say the conveyancing profession is in the same environment now is doubtful – back in 2016 that extra activity was confined just to buy-to-let/additional property purchases, and the stamp duty increase was going to be specifically for them, not the entire market. Plus, the entire country was not in lockdown or attempting to face off a deadly pandemic. Times have certainly changed.
That 2016 deadline does however provide us with an interesting five-year anniversary right now, especially if we are to see purchase activity tail off slightly after the end of March. Because of course large numbers of landlords would have taken five-year deals back then, which as we speak, will just be weeks away from coming off those special rates.
Even if they took two or three-year products in 2016 and then 2018/2019, it still means that Q1 this year should present a sizeable number of maturing buy-to-let deals and there’s no doubting that landlord borrowers will be looking to remortgage/transfer where possible so they do not end up moving onto the lender’s reversion rates.
In a market environment where future purchase activity is slightly uncertain, the remortgage market grows in importance. Indeed, following 2020 where purchasing was a driving force, we could quickly return to a position where remortgaging becomes the bedrock of any advisers’ business again, particularly after those Q1 cases have moved through to completion.
Many in the market, us included, are acutely aware that any stamp duty holiday deadline could see some significant changes present themselves after it has passed. It’s why we’ve also focused heavily on our new business and sales team resource because we recognise that this market needs to work on what happens throughout the rest of the year.
For advisers there’s clearly the landlord remortgage business to secure, and remortgage business in general, plus of course no-one quite knows how the pandemic will continue to shape homeowners’ needs, their finances, their job situation, and what also might happen when the vast amount of government support starts to tail off.
It’s clear to us certainly that the need for advice is only likely to increase, especially given that many borrowers’ 2020 experience is going to fundamentally alter their mortgage journey going forward. There is likely to be a move from mainstream to specialist for many borrowers, plus a complexity to their financial history – because of Covid-19 – that simply wasn’t there before.
As a lender active in these sectors it’s up to us to provide the product ranges and services to meet those changing borrower circumstances, and we’ll certainly be supporting advisers to secure that renewal business and respond to all the new enquiries that should come their way throughout 2021.
George Gee is commercial director at Foundation Home Loans