"Offering this financial relief to incentivise a new wave of homebuyers to enter the market is one thing, but ensuring that they also have access to the finance needed to complete on a transaction is another issue entirely."
While some have questioned its length and long-term impact on house price growth, there is a general acceptance that it will spark a new wave of property transactions over the coming nine months. Importantly, the exemption applies to second homebuyers and those involved in the buy-to-let market – an important inclusion that was not mentioned in the original leaks of the proposed exemption.
Offering this financial relief to incentivise a new wave of homebuyers to enter the market is one thing, but ensuring that they also have access to the finance needed to complete on a transaction is another issue entirely.
Brokers are well aware of the complications prospective homebuyers are now faced with when applying for a mortgage. Similar to what we saw in the aftermath of the global financial crisis, banks have become extremely risk averse. The number of high street mortgage products currently available is limited. What’s more, the majority of these products require proportionality large deposits, meaning that some buyers are simply not in position to apply for a mortgage.
Overall, this means homebuyers are faced with dealing with lenders who adhere to a stringent application process. Any cases that don’t neatly tick the boxes of an application are likely to encounter delays, and this will remain the case so long as Covid-19 uncertainty lingers.
Assessing all the available options
With the stamp duty holiday now underway, brokers and homebuyers need to be fully aware of all the lending options available to them. This must go beyond the high street and include specialist finance lenders as well.
The reason for this is simple. During the Covid-19 lockdown, specialist finance lenders have played a vital role in propping up existing property transactions and ensuring buyers are able to complete on time without losing their deposit. Effectively, this category of lender was able to fill the void left by the mortgage lenders.
The advantages of bridging loans are well suited to the current market situation. They are, by their very nature, a fast form of finance. Once an enquiry has been received, a bridging loan can be deployed within a matter of days following the necessary due diligence and checks.
Bridging loans are also tailored to the meet the individual needs of each borrower. Unlike big banks and mortgage providers who adhere to rigid application processes, bridging lenders are flexible and can deploy loans for those in a particularly complex or unorthodox financial situation.
A market in transition
The overall effectiveness of the stamp duty holiday will be revealed in the coming months. With Nationwide and Halifax’s respective house prices indexes revealing that house prices have fallen for the first time in eight years, and with property transactions down 50% in May, the Government is hoping to now turn things around.
Based on what was seen following the initial easing of lockdown measures, we should expect to see a spike in property transactions taking place for the rest of the summer. The challenge is ensuring enough momentum is maintained so that transactions can continue. We might even see the Government deciding to extend the stamp duty holiday in the Autumn Budget should this be the case.
For now, it is important that brokers and homebuyers are given access to the finance needed to complete on property transactions. The ability to act confidently and quickly will play a pivotal role in determining whether a sale can be successfully completed. As such, any delays or complications in having the necessary loan deployed can have significant ramifications.
Overall, there’s good reason to be positive regarding what the future may bring. The Government’s tax relief comes at an important time and, should there not be a second wave of cases, a flurry of activity within the property market will help support the broader economic recovery of the UK post-Covid-19.
