Business owners have to be prepared to deal with all kinds of challenges. One of them is the ability to get approved for a mortgage. Unfortunately, this challenge appears to be getting even more difficult thanks to the combined impact of COVID19 and Brexit. The self-employed and the mortgage market Since 2014, lenders have been legally obliged to scrutinize a potential borrower’s ability to repay a mortgage. If they are shown to have failed in this obligation, then they can lend up in all kinds of trouble with the regulators. On the one hand, this approach may be what is needed to prevent a repeat of 2008. On the other hand, it severely limits lenders’ ability to exercise human judgement. It also, arguably, encourages them to err on the side of caution. Quite bluntly, mortgage lenders may see the inconvenience of turning down a customer as being preferable to risking sanctions from the regulator. This is bad news for anyone in non-standard work situations, including the self-employed (both sole traders and business owners). Employees on zero-hours contracts and other forms of (potentially) variable income may also find themselves struggling to get approved by a mortgage. What’s more, recent events have made that challenge even greater. COVID19 and the mortgage market Lockdown 1.0 forced the housing market to a skidding halt. Ever since then, the UK has been in various states of COVID19 response. These have ranged from mild restrictions to complete lockdowns. What’s more, over time, the restrictions have become even more granularized. This has meant that the economic impact of COVID19 has varied from place to place depending on the severity of the restrictions. To make matters worse, the restrictions have changed frequently, often at fairly to very short notice. This has forced mortgage lenders to keep trying to figure out a response to an ever-changing situation. As if this wasn’t hard enough, mortgage lenders have also had to work out what they need to do to keep their own operations running. This not only meant keeping their staff safe but also dealing with borrowers experiencing financial difficulties due to COVID19. They then had to deal with the impact of the government’s Stamp Duty holiday. This turbocharged the housing market and hence led to a deluge of mortgage applications. Sadly, however, data from mortgage broker platform Haysto indicates that business owners, directors of limited companies and sole traders were at high risk of rejection because of their jobs. Brexit and the mortgage market The UK’s final exit from the EU has been a work in progress for some time now. In fact, even though the UK has now officially left the block, there’s a strong case for arguing that it still is. There has been widespread media coverage of the challenges involved in transporting goods between the UK and the EU and the UK and NI. To be fair, unscrambling the UK’s long relationship was a massively complex task. Arguably, it was almost inevitable that the post-withdrawal period would highlight the shortcomings of any agreement. It’s also reasonable to point out that at least some of these issues might have been dealt with earlier if the UK government hadn’t been dealing with the impact of COVID19. None of this, however, is likely to be of any immediate comfort to business owners trying to find a post-Brexit “new normal”. What’s more, it’s unlikely to help their chances of getting financing of any sort. Quite simply, lenders may be sympathetic to the plight of business owners but they also need to be pragmatic about the chances of getting their money back. The way forward Hopefully, vaccines will soon deal with COVID19 and, also hopefully, the issues with Brexit will be resolved sooner rather than later. Once business owners can get time to breathe and look at the future, they can start to focus on making themselves attractive prospects as borrowers. Your property may be repossessed if you do not keep up repayments on your mortgage.

Like many other industries, the real estate sector has been working to leverage the internet as much as possible. COVID19 has helped to give this trend a major boost. It is not, yet, always practical to complete a home sale entirely from the comfort of your current home. It is, however, very possible to complete a significant percentage of it online. Here are some tips. Online mortgage applications Assuming you need a mortgage, there are two major advantages to getting preapproved for one. Firstly, it keeps your expectations realistic. Secondly, it’s a way to reassure home-sellers that you can make good on an offer. A potential lender is going to need you to provide documents to them. There are two ways these can be transmitted. One is to send scanned copies and the other is to hold the originals up to a camera while a human checks them. You may have to do a combination of both. In either case, think about what you need to do to make sure that your documents can be read easily. If you’re using a proper scanner to scan documents, check the settings and check the output. If you’re using a mobile, do the same and also make sure that the document is flat and well lit. Be careful of reflections on plastic coatings (e.g. on passports). Likewise, if you’re holding a document up to a camera so a human can see it, make sure you have plenty of lighting at your end. Also, be prepared to move the document around the screen according to their instructions. Househunting Regardless of whether you’re using one of the major property portals or a local estate agent’s website, take some time to learn how it works. In particular, look for filters. These can make it much easier for you to hone in on the sort of property you really want. You might find it helpful to read the text description of a property before you start looking at the pictures. The text box is often the place to find the key details of a property. It will typically set out everything from the number of rooms and their sizes to the installed utilities to sustainability information like the EPC. Checking this first will save you falling in love with the photos of an unsuitable property. That said, the photos should generally be what you look at next. They can give you a feel for what it’s like to live in a property. Video can be even more informative. Even if property portals do not host it, you may still find links to home tours hosted on YouTube. Viewing a house Only you can decide if you’re willing to buy a property on the basis of a virtual tour or if you need to see it in person to be sure. It is, however, worth thinking about this before you start your house-hunt as virtual viewings (private and group) are increasingly likely to be an option. These offer some of the interactivity of a regular home tour (e.g. the ability to ask questions) but can be undertaken at a (safe) distance. It will be interesting to see if virtual home tours form part of the new normal after COVID19. They might not be suitable for all properties (e.g. very individual and/or premium ones). They do, however, offer a lot of convenience to buyers, sellers and real-estate professionals. In particular, they can save a lot of travelling time (and the associated environmental footprint). Conveyancing Once you’ve had an offer accepted, you’ll need to start the process of conveyancing. These days, you can look for a conveyancer online. You may even be able to go through the entire conveyancing process without ever meeting them in person. Do, however, stay alert to the possibility of scammers posing as your conveyancer. Make sure you are absolutely clear about the right way to contact your conveyancer and the right bank account to use for all money transfers. Your property may be repossessed if you do not keep up repayments on your mortgage.

Data from the Halifax House Price Index shows that average house prices have increased by 7.6% in the year to November and by 1.2% between October and November. That’s in spite of COVID19 and Brexit drawing ever closer. Can house-price increases continue into 2021 and beyond? Here are some points to consider. The impact of the Stamp Duty holiday The Stamp Duty holiday was, effectively, a time-limited special offer, albeit on tax. It’s due to end on 1st April 2021. This could lead to a mad scramble over January 2021 as buyers rush to put in offers while they still have at least a chance of completing before the deadline. After this, however, the realities of conveyancing are going to reduce the relevance of the tax break. It’s also worth noting that the Stamp Duty holiday didn’t benefit first-time buyers as much as it did onward movers and investors. This is because first-time buyers already benefited from a reduction on Stamp Duty. In fact, there’s a case for arguing that they may actually be better off when the Stamp Duty holiday ends and they are the only ones with the Stamp Duty break. Potentially, the end of the stamp duty holiday could see a greater percentage of first-time buyers enter the market. This would, however, depend on a number of other factors most of which relate to their ability to finance a property purchase. In other words, it would depend on whether first-time buyers can put together deposits and get mortgages. The state of the mortgage market The key question here is arguably whether or not the government is likely to involve itself in the mortgage market. If it does, there are several moves it could make. One is to work with regulators to ease off the rules on affordability. This move would, however, carry two obvious risks. Firstly, there’s the risk that lenders simply wouldn’t take up the opportunity to use more relaxed lending criteria. Secondly, there’s the risk that the government could find itself in another bail-out situation if they did. After all, if they encouraged lenders to relax their lending criteria, then it might be difficult for them to refuse to accept any blame for the consequences. The government has extended the Help-to-Buy scheme while restricting it to first-time buyers. It has also mentioned plans to make it possible to buy houses with just a 5% deposit. It’s unclear whether or not this was a reference to the confirmed Help-to-Buy scheme or something else. The issue of remote working If remote working becomes an established part of the “new normal”, it could have massive repercussions for the property market. What’s more, it might only take a very low-level of adoption for the impact to be felt. Assuming a five-day work-week, staff working remotely for just two of those days could be enough to change the dynamics of the property market. On the employer’s side, encouraging remote work could allow them to reduce their need to rent commercial property. It would also allow them to continue to benefit from the investment in remote infrastructure they would have had to have made to keep going during COVID19. On the employee’s side, the less often you have to go to the office, the less you have to worry about minimizing your commuting time and the more you have to think about your home-office space. This could encourage buyers to move out of traditional commuter-belt areas and into areas where they can afford larger homes with space for decent home offices. If so, the end result could be an overall adjustment of property prices. City-centre locations and traditional prime commuter-belt towns could see less demand and therefore potentially lower prices. That said, current homeowners might simply choose to stay put unless they were forced to move. This might create an environment with fairly stable prices but few transactions. Your property may be repossessed if you do not keep up repayments on your mortgage.

If you are fortunate enough to have savings, then it’s important to use it to best effect.  Paying down your mortgage is one option, but there are others you should consider first. Building up an emergency fund Emergency funds (or “cash cushions”) are handy at the best of times. Right now, they may literally end up being a lifeline. If you only have limited savings then your best option by far may be to leave them as a cash deposit you can access if you need it. In fact, you may want to build up that pile of cash rather than pay off your mortgage. Even if you’re earning less in interest on your cash balance than you’re paying in interest on your mortgage, there is still a meaningful value in having cash savings. The value is basically a certain level of “self-insurance”. In other words, it’s the knowledge that you can deal with life’s slings and arrows without having to rely on getting financing. Increasing your insurance coverage This is essentially the same idea but from a slightly different perspective. With COVID19 yet to be brought under control and Brexit on the way, now could be an excellent time to review your insurance cover. In addition to thinking about cover for your belongings, you might want to think about cover for your income, your health and your pets’ health. You might also want to consider whether or not any of your possessions or activities could open you up to legal risk. Pets and bicycles are definitely worth a thought here. If so, it could be worth getting insurance to protect against this. Even if the possibility of it happening is low, legal bills, like medical bills, can be high. This can justify the cost of insurance. Paying off higher-interest debt Your mortgage may be your biggest, single debt but it may not be the one with the highest interest rate. If you have savings and are fully insured, then it may be best to prioritize paying off credit and store cards and personal loans. Investing in the stock market If you’re really confident that you can live without the money, then you may want to consider putting it into the stock market. There is no “right or wrong” about this, just what works for you. Essentially, you need to think about your skill and confidence as an investor and decide whether or not your investment returns would beat the savings made by reducing your mortgage. Investing in your home This may seem like an odd suggestion, but if you’ve been thinking of making updates to your house, then now may be the time to do it. Not to put too fine a point on the matter, if lockdowns continue into 2021, you may be spending a lot more time at home than you’d have liked. If so then you might want to prioritize anything which improves the time you spend in it. That said, you may want to think carefully about making any significant upgrades if you’re thinking about moving. Even if they add value to your home, they may not add enough value to justify the initial outlay. Investing in yourself This may seem like an even odder suggestion, but it is worth considering. In blunt terms, take a look at your current income stream and the skill-set that generates it. Think about how robust or vulnerable that income stream is. Then think about what that means in terms of making sure that you can maintain or even improve your income in 2021 and beyond. Depending on your situation, this could mean anything from developing existing skills to learning new ones to starting a new business or side-hustle. The key point is to think ahead about what life might throw at you and do your best to prepare for it. Your property may be repossessed if you do not keep up repayments on your mortgage.

The Mortgage Market Review took effect in 2014. Over the long term, it may reduce the risk of another 2008. For the present, however, it has led to some people being trapped on expensive mortgages because they are being told that they cannot afford better deals. The plight of these “mortgage prisoners” is well known. What is less well known is what to do about it. The basics of “affordability criteria” Before the MMR mortgage lenders were able to use fairly blunt lending criteria, such as multiples of income. Post the MMR, lenders became obliged to take a much more detailed look at a potential borrower’s finances and to think much more rigorously about what they could and couldn’t afford. In particular, lenders had to think about what would happen if interest rates were to rise over the course of the mortgage. The official aim of the MMR was to ensure that borrowers only took on loans they could genuinely afford, hence the name “affordability criteria”. This reduced the risk of them ending up having their home repossessed with all that implies. It may not have been entirely a coincidence that reducing the risk of defaults also reduced the likelihood of a mortgage lender getting into financial trouble. This in turn reduced the likelihood of them asking the government for assistance and hence potentially opening up a massive can of worms. The problem with “affordability criteria” Regulator-mandated affordability criteria effectively take away a lender’s ability to use their own discretion. This removes their ability to make special arrangements for people in non-standard situations including mortgage prisoners. Quite simply borrowers have to be able to meet the affordability criteria as set out by the FCA or lenders have to decline them. The FCA has tried to address this by offering lenders some leeway for dealing with mortgage prisoners. This has certainly helped in some cases. There are however a lot of circumstances in which mortgage prisoners cannot take advantage of these special accommodations. In particular, they do not apply to people with current or recent arrears. This is arguably rather ironic since the expense of being trapped in a high-rate mortgage may have played a role in the borrower being driven into arrears. Similarly, getting a better deal might go a long way to stopping the borrower running up more arrears. It’s also worth noting that the FCA simply offers lenders the option to apply extra flexibility when dealing with mortgage prisoners. It does not mandate that they do so. What’s more, it’s hard to see how it reasonably could unless they were also offering some kind of government-backed guarantee in the event of a default. Will the government intervene? Not to put too fine a point on the matter, the plight of mortgage prisoners was created by the government. You could therefore argue that the government has a moral duty to put the matter right. After all, the banks were bailed out in their time of need and frankly, their situation was of their own making. Mortgage prisoners by contrast are victims of government action. This raises the question of what the government could do. There are plenty of possible suggestions here. Possibly the most obvious one is to extend the existing Help-to-Buy scheme to mortgage prisoners. In other words, provided that the mortgage prisoners had at least 5% equity in their property, the government would guarantee up to 20% of their mortgage. This would hopefully be enough to open up the regular mortgage market to them. As a minimum, they would get five years on a better deal to clear their feet. After this, they would potentially have to pay 1% interest on the government loan. Even this, however, could be more affordable than what they are paying now. Your property may be repossessed if you do not keep up repayments on your mortgage.

The Stamp Duty holiday applies to all properties purchased between 8th July 2020 and 31st March 2021 (inclusive). Assuming it closes on schedule, there are basically three months left to complete transactions. This raises the question of whether the Stamp Duty holiday is still meaningful for new buyers (and sellers). New buyers If any buyer is considering entering the market now, then they really need to get their mortgage arrangements in hand as soon as possible. This could mean going down the mortgage preapproval route while they are house-hunting. If they find a property before the mortgage preapproval is finalised, they might be able to put in an offer. Then they could get their lender to push through the approval or change to asking for a mortgage on that specific property rather than a generic preapproval. What’s more, the safest route, insofar as there is one, is to look for properties which are both chain-free and fairly standard. The first point is obvious. Not only is a chain only as good as its weakest link, but longer chains also take longer to move and right now time really is of the essence. The second point basically means to look for properties which are likely to provide straightforward work for conveyancers. Do some research on the area and see if anything throws up a red flag, for example, mining works or nearby water. Also, ask sellers directly if they have all their paperwork ready. New sellers You may want to think about whether or not you’re prepared to accept an offer from a buyer without mortgage preapproval. In principle, the risk of losing out on the Stamp Duty holiday is on the buyer, not the seller. In practice, however, you need to think about what may happen if the buyer cannot complete in time. The two big risks are that the buyer pulls out completely and that they reduce their offer. In fact, the buyer could find themselves forced to do one or the other. They may not be able to get a mortgage at all. If they do, they may not get a mortgage to cover what they initially agreed to pay. Similarly, you might want to think carefully about whether or not you want to take your chances with an onward chain. Even if you think it’s secure, you may find that buyers for your property will be wary about getting involved with it. They’re already getting close to “the point of no return” for getting conveyancing finished before the deadline. On that note, it’s in everyone’s interest for sellers to get their paperwork in order as early as possible. Ideally, the buyer’s conveyancer should be handed everything on the proverbial plate. Sellers should also make sure that they are easily contactable in case the conveyancer does have any further questions. Is it worth the rush? Buyers need to be careful that they don’t end up rushing into making decisions they later regret. This is particularly true for first-time buyers who already get Stamp Duty benefits. In fact, unless first-time buyers are under pressure to move, now may be the time for them to sit on the sidelines and wait out the rest of the Stamp Duty holiday. They will then regain their tax advantage over onward movers. Even if the Stamp Duty holiday is extended, its effect may not be as impressive the second (or subsequent time around). The whole point of time-limited offers is that they force people to take action within the given time frame. If people get the idea that the time frame can be extended, then they may feel under (a lot) less pressure to act. Your property may be repossessed if you do not keep up repayments on your mortgage.

Negative interest rates are when the Bank of England charges banks for holding their deposits. The idea is that these charges will filter through into the banks’ customer-facing products and ultimately encourage spending rather than saving. Negative interest rates have never been used in the UK, but then they haven’t been ruled out either. Here is what you need to know. COVID19 is getting expensive The brutal reality of COVID19 is that there is a human cost and a financial cost. What's more, the financial cost also has a human cost. There are really only two ways for the government to cover its spending on COVID19. One is to cut back on services and the other is to raise taxes. Realistically, it is likely to use a combination of both approaches. This could, however, be a lot more complicated in practice than it sounds in theory. There is a limit to how far the government can cut back on services without generating serious negative consequences. For example, when schools were physically closed, many parents struggled to juggle childcare and work. That leaves raising taxes, but this too has its complications. A lot of tax revenue depends on behaviours which are partly or wholly voluntary. For example, VAT only applies if people make purchases. If the government raises taxes too high, there is a very strong chance that people will simply adjust their behaviour to compensate. Negative interest rates discourage saving The direct impact of negative interest rates is to discourage regular banks from keeping deposits with the Bank of England. The indirect impact of negative interest rates is to make conditions (even more) unfavourable for savers. Currently, there is little room to lower interest rates on cash deposits. This suggests that charges may be the order of the day. If UK banks and building societies follow the precedent set in other countries, savers with small deposits will continue to be able to hold them for free. The charges will be reserved for savers with larger deposits. It remains, of course, to be seen what qualifies as a larger deposit. It also remains to be seen whether the charges will be a flat fee, a flat percentage or a rising percentage. The prospect of negative interest rates also raises questions about the use of speciality ISAs like the Lifetime ISA. This benefits from a government bonus scheme. The government cannot just ring-fence Lifetime ISAs (or indeed any ISAs) from the consequences of negative interest rates because the government cannot directly control them. Negative interest rates might not help borrowers If borrowers are on fixed-rate deals, then the fixed rate applies regardless of what happened with the base rate. If borrowers are on floating-rate deals, then the specific terms of the deal will determine the extent, if any, to which they benefit. The lender’s contract may state that there is a minimum interest rate which applies no matter what. In principle, lenders could be tempted into offering new products with lower interest rates. In practice, lenders might be more concerned about avoiding a rerun of 2008. If the consensus in the sector was to avoid risk and shore up balance sheets, borrowers would have very little choice but to accept the matter. Negative interest rates might stimulate the economy The general idea behind negative interest rates is that motivates people to get cash out of deposit accounts and into work. This does not necessarily mean high-street spending. It may mean the stock market or property. In theory, however, getting money (back) into circulation should help to stimulate the economy in some way. Opinions are divided as to whether or not this theory actually works in practice. There’s really no way of addressing this since you can’t run a crisis twice over changing one variable. The UK may, however, be about to try the experiment. Your property may be repossessed if you do not keep up repayments on your mortgage.

Mortgage application documents tend to be long, detailed and, frankly, very tedious to complete.  It is, however, very advisable to take the time to complete them properly.  This will allow the potential lender to go through the checking process in the shortest possible time.  When completing the application, remember that there are five key questions the lender needs to have answered. Who are you? You’ve probably heard of identity theft. Hopefully, you’ve taken steps to reduce your likelihood of falling victim to it. If not, now would be a good time to research and implement preventative measures. Lenders also need to take preventative measures to make sure that they do not end up giving money to fraudsters. In short, therefore, be prepared to prove your identity. Can you afford the mortgage? This is an obvious question but these days it generally requires a very detailed answer.  That answer typically starts with your credit score, but it doesn’t end there.  It’s strongly recommended to keep an eye on your credit score even if you’re not thinking about applying for credit.  You should certainly do everything you can to maximise it when you’re applying for a mortgage. Firstly, make sure that your credit record is free of errors. Secondly, make sure that you’re on the electoral roll at the address you're using for your application. Thirdly, see if there are any obvious “quick hits” which could improve your score. For example, do you have credit cards you never use but which are still open? If so, close them. After all this, expect to have to show details of your current outgoings. Then expect to be quizzed over how they might change during the lifetime of the mortgage. If you do have any compelling reason to think that your financial circumstances might improve significantly then make sure to mention them, just remember to back up any claims you make. What is the source of your deposit and income? If your deposit has been built purely out of your personal savings, then proof of income will normally be sufficient. If, however, it includes gifts, an inheritance, the results of capital gains or anything non-standard (e.g. a gambling win), then you will need to be prepared to show the source of the money. If you are in regular employment, then proof of income should be fairly easy. If you are in self-employment, then you can expect to need to show tax returns. You may, however, need to answer further questions. This would typically be the case if your income was noticeably higher than would be expected for someone in your line of employment. If this is the case, then you will probably be aware of it yourself. It would therefore be sensible to explain it on the application and, of course, provide any supporting evidence. Could anyone else have a claim on your assets? The defining feature of a mortgage is that it is a loan secured against property. This means that the lender automatically has a certain level of protection against defaults. If someone else could have a claim on that property, the level of protection is reduced. You may still be able to get a mortgage, but the lender may lower the amount they are prepared to offer. Can you be trusted? In addition to checking your credit score, you might also want to have a look at your record with National Hunter & Cifas. These are two fraud-tracking databases. Hopefully, it will be completely blank. As with credit records, however, errors do happen, although they are extremely rare. If you do find yourself erroneously listed on one of these databases, then it’s vital to take action immediately as it can have major repercussions. Your property may be repossessed if you do not keep up repayments on your mortgage.

In a normal year, the housing market slows down significantly over the winter months. This year, however, is definitely not a normal year. This year, buyers will be racing to beat the clock as it ticks down on the Stamp Duty holiday. Sellers, therefore, have an excellent chance of making a sale, if they take the right approach. Here are some tips. Organise your paperwork If 2020 has one bright spot for home-sellers, it’s that this is likely to be a year when buyers are super-motivated to complete quickly. In fact, you may even see more buyers prepared to buy a new property before they’ve sold their old one. This would ensure that they get at least some benefit from the Stamp Duty holiday. They will therefore be very keen to have reassurance that you really are a motivated seller. Letting them know, or better still see, that you have all documentation ready and waiting will be a very positive sign for them. Be sensible about pricing Remember that the Stamp Duty holiday was introduced as part of the government’s Plan for Jobs. The general idea was to make home-buying more affordable and hence easier. It was not for sellers to put up their prices to what they would have been with Stamp Duty so that they could pocket the difference. You don’t have to drive your price down into “bargain-basement” territory. You do, however, need to be realistic about the fact that a lot of buyers are likely to be wanting to spend as little as possible. In other words, if you’re looking for a quick sale, price on the lower end of sensible. Basically, make sure buyers feel like they’re getting a bargain. Offer an online video tour It’s long been standard practice for online home listings to contain floorplans and photos as well as a detailed text description of the property and its key features. If you’re working with a real-world estate agent, they’ll probably arrange this for you. If you’re working with an online estate agent, they’ll probably offer this as an extra service. If so, it’s well worth considering. Now that COVID19 is here, video tours have ceased to be reserved for multi-million-pound properties. In fact, they’re becoming increasingly popular. The good news is that you don’t need any special skills or equipment to record a basic video tour of your property. Your phone will do just fine and you can upload the results to YouTube and put the link in your listing. You do, however, need to keep safety in mind at all times. Make sure that any personally-identifiable information stays off-camera and keep all valuables out of sight. Remember that this includes Christmas presents under the tree and, these days, sadly pets. Keep health and safety in mind Obviously, you’ll need to be COVID19 aware, but remember that general health and safety still applies too. In particular, keep in mind that days are short in winter. This means that there’s a strong chance that people coming to view your house will be coming in the dark. Make sure that you have plenty of outdoor lighting for them to find their way to your door. Present your home (and garden) appropriately All the usual home (and garden) presentation rules still apply. This means that you might want to give some thought to your choice of Christmas decorations. It’s fine to have the house decorated. Just make sure that your choice of decor is neutral, or, at the very least, unlikely to cause offence. For example, if you’re into “naughty Santas”, keep them for another year.

The UK has long been a famously home-loving nation. Under the current circumstances, that’s probably just as well. One of the many and varied consequences of COVID19 is that it has led to people reassessing their homes. In many cases, they have taken, or intend to take, steps to improve them. Unsurprisingly, budget-friendly changes seem to be the most popular. Major home improvements have slowed Defining “major home improvements” as “home improvements which need planning permission” creates an effective measure for judging the impact of the lockdown. Bridging loans broker Octagon Capital analysed data from gov.uk. This analysis showed that applications for planning permission in April, May and June 2020 were over a fifth lower than the same periods the previous year. The good news is that the level of approvals remained fairly constant. This indicates that planners are both willing and able to work with home-owners. In other words, planning departments are still operating fairly normally despite the pandemic. Home-offices are the new must-haves Home-working has been a growing trend for some time now. Up until the pandemic, however, most of that growth was through freelancers and start-ups. Now, even the most traditional companies have been forced to invest in home-working infrastructure and, bluntly, to make it work for them. Many are now openly enthusiastic about its long-term potential. It’s therefore hardly a surprise that multiple surveys are highlighting the need for a proper home office as a new must-have. In fact, it’s probably a fairly safe bet that a lock of the lockdown planning applications have come from people investing in “garden offices”. Those without a garden are looking at ways to create a dedicated office space indoors. Of course, you can only carve out a dedicated office space if you have actual space to carve. This has obvious implications for the inner-city property market. Up until 2020, many people, especially young adults, were happy to trade space for the joys of city life. Now, however, this is being rapidly reassessed. In fact, survey data is pointing to a clear “flight from the city”. Home gyms and gardens are highly desirable Like home-working, home-exercise has been a growing trend for some time. In general, however, it has been a supplement to gyms rather than a replacement for them. Currently, however, people are being forced to look at other options. It will be interesting to see whether this change sparks a long-term development or whether it fades away with COVID19. Gardens have long been desirable features in family homes. Since the lockdown, however, survey data indicates that they’ve become increasingly desirable to young adults too. Given the UK’s high population-density, this could be a sign that planners and developers will need to start looking at alternative options such as communal gardens, roof gardens and even balconies. Cosmetic updates are the order of the day Statistics from homeware retailers such as B&Q show that the initial lockdown was quickly followed by massive demand for DIY materials. Unsurprisingly, paint and wallpaper led the way. Anyone who knows anything about DIY knows that these are generally the quickest and most affordable options for giving your home a refresh. Anyone who refreshed their home during lockdown would have had an advantage if they subsequently put it on the market. Rightly or wrongly, first impressions do matter a lot in sales, especially property sales. It may be, however, that people were simply updating their homes on the expectation that they were going to be seeing a lot of them over the coming months. If that was the case, then their expectations have been justified by the second lockdown. It will be interesting to see if this triggers a further wave of home-improvements.

With the UK now, finally, moving out of lockdown, a lot of questions will inevitably be asked about it. Some will be largely academic while others will be purely practical. Arguably one of the most pressing questions of all is the question of how we cover the bill for the last few months. Could the Coronavirus result in higher taxes? It is hard to rule that out for the future, for the time being, however, the focus is on tax cuts, including a cut to stamp duty. The new rules in brief Technically, Stamp Duty has not been cut, the threshold to pay it has been raised from £125K (or £300K for first-time buyers) to 500K. This threshold applies to all buyers, but those buying a second or subsequent home will still have to pay the 3% Stamp Duty surcharge. The Stamp Duty holiday came into effect on the 8th of July and is scheduled to last until 21st March 2021. For completeness, Stamp Duty only applies in England and NI. Scotland has Land and Buildings Transaction Tax and Wales has Land Transaction Tax. These both work along similar lines but they follow rules set down by the respective regional parliaments. The “winners” In principle, the “winners” are anyone who completes on a property during the period of the Stamp Duty holiday. In practice, while they might all be winners, some people will win more than others. For example, the discount for first-time buyers has now been absorbed into the general Stamp Duty holiday. This means that first-time buyers will be facing the same transaction costs as people who have already owned property and who have had a chance to build up equity in it, which they can put towards the purchase of a subsequent home. It’s also worth noting that even with the 3% surcharge, the Stamp Duty holiday is good news for buy-to-let investors looking to expand their portfolios. This could make life more challenging for first-time buyers. That said, it could be good news for renters, only time will tell. The Stamp Duty holiday might also benefit industries related to property. In addition to estate agents (and mortgage lenders), tradespeople might also see an upturn in business. Sellers might want their homes at least touched up before they put them on the market and buyers might want their new homes customized to their liking. Similarly, retailers which sell homewares might see improved sales as buyers, especially first-time buyers, furnish and decorate their properties. The “losers” You could argue that the only loser is the government, but the counterargument to this is that essential government spending has to be financed from somewhere. This means that the revenue lost through the Stamp Duty holiday (at least potentially) has to come from somewhere else. In theory, it could come from the taxes paid by the various industry sectors which benefit from the move. In practice, it very much remains to be seen how much (if any) extra tax it will generate. If it doesn’t generate enough, then presumably there will have to be tax increases in other areas. People who completed before the holiday may see themselves as losers. You could argue that they’re not, they’re just not winners, but that probably won’t be a great comfort to them. Similarly, people who can’t complete during the holiday period are also likely to see themselves as losers, especially if home prices increase. In fact, if this Stamp Duty holiday results in home prices increasing sharply, then the group of losers could extend beyond those who are priced out of the market and come to include those people who see their council tax bills increase based on higher home values. Your property may be repossessed if you do not keep up repayments on your mortgage.

It’s four years until the UK is next due to have a general election, but it seems like campaigning is starting early. Speaking at the annual Conservative conference, Boris Johnson announced the introduction of 5% deposits for first-time buyers. He did not, however, given any details of how this would work. A new name for an old scheme? One of the interesting points about the Prime Minister’s announcement is that there already is a scheme to help first-time buyers get on the property ladder with just a 5% deposit. The Help to Buy Equity Loan scheme does exactly that. It was initially made available to all buyers. As of April 2021, however, it is due to be restricted to first-time buyers. One very possible explanation is that the government is going to revamp the existing Help to Buy Equity Loan scheme. At present, this is only available on new-build homes and is due to close at the end of March 2023. If it were to be made available on existing property and extended indefinitely, then it could be presented as a new scheme. Making the Help to Buy Equity Loan scheme available to people buying existing properties could have other political advantages. Firstly it would deal with the criticism that the scheme is effectively a backhanded subsidy for home-builders. Secondly, it could stimulate the market for private home-sellers and thus help them to move on. Greater emphasis on shared ownership? Another possibility is that the Prime Minister is looking to extend the use of shared-ownership schemes. Potentially a first-time buyer could put down a 5% deposit on an agreed purchase price and then pay a combination of mortgage and rent to buy their home over time. This already works in practice. At present, however, it only works on a fairly small scale. Ramping it up to work over a larger one could be fraught with all kinds of complications and pitfalls. The obvious one is working out a way for first-time buyers to exit the property easily if they have only bought part of it. It’s also hard to see how such a scheme could be applied to private sales of existing property. Restricting it to new builds, however, could substantially limit the choice available to first-time buyers. It could also open up the scheme to the same criticisms as the existing Help to Buy Equity Loan scheme. Moral hazard and taxpayer risk However you look at it, at the end of the day, a 5% deposit means a 95% mortgage. At least it does if you want to buy the entirety of a property. The only question, therefore, is how this mortgage is structured. In other words, how much risk is going to fall on the first-time buyer/regular lender and how much is going to fall on the government/taxpayer? In the existing Help to Buy Equity Loan scheme a buyer essentially runs a 75% mortgage for 5 years. They then add on the 20% equity loan owned by the government. The problem is that it is highly unlikely that they will have paid off 20% of their loan principal in those 5 years. Their home may have increased in value, but this is irrelevant if their income does not stretch to higher payments. This means that first-time buyers could end up being forced to sell their homes so they can pay off the regular mortgage and the equity loan. Leaving aside the disruption this could cause, it could also leave them at a financial loss. If they end up in negative equity and need to default, then the consequences will be shared (possibly unequally) between them and the taxpayer.