"We continue to see a healthy level of demand from certain groups of would-be purchasers."
It has been a difficult year so far for the purchase market. The figures on property transactions released each month by HMRC regularly show a drop off on last year - in June for example purchases were down 9% on the same month last year.
While it’s certainly true that the purchase market has changed of late, however it would be wrong to think that this area has completely died off. In fact, at Mansfield Building Society, we continue to see a healthy level of demand from certain groups of would-be purchasers.
Those who still want to buy
For example, there is still demand from younger borrowers, a generation who have really only experienced the super-cheap borrowing that has been so prevalent since the financial crisis of 2008.
These buyers still have aspirations of moving up the ladder, or simply getting onto the ladder in the first place but are having to reassess their expectations and what’s possible as things stand.
There is also a segment of buyers, often those looking to purchase for the first time, who are targeting properties which were previously available for rent. It’s no secret that the market is becoming tougher for some landlords, not only due to the tougher affordability tests but also the incoming rules around energy efficiency. Landlords with older properties, which may struggle to meet the new minimum standards for energy performance certificates are increasingly looking to sell up, opening the door for would-be buyers.
While the changing state of the market has made things less appealing for small-time landlords, that isn’t necessarily the case for the property professionals.
At Mansfield we have seen demand continue from professional landlords who are able to take a more long-term approach, with decent numbers seeing the current situation as a good opportunity to expand their portfolios.
The right lending approach
These groups represent quite a diverse selection of potential buyers. What unites them though is the need for a more thoughtful and flexible approach from lenders in delivering the funds needed to complete the purchases.
First-time and second-time buyers for example will face a very different set of product choices today than would have been the case just a few years ago, which can make achieving that purchase feel rather more difficult.
It doesn’t have to be impossible though, should they work with a lender that has embraced a little creativity in the way they design their products. We have seen a strong interest in our Family Assist range for first-time buyers, since the product allows buyers to purchase without putting down a deposit. Instead, a loved one, such as a parent or grandparent, provides the security using either their own property or savings deposited with us.
It’s an excellent example of how it’s possible to find a solution to what could be a challenging situation, simply through being a little creative.
Supporting landlords
There is a similar story with professional landlords too. They are keen to move swiftly, to take advantage of the more competitive pricing on properties at the moment, but actually accessing the funding needed may be unnecessarily difficult.
The interest coverage ratio has become a particular issue, with landlords put in the difficult position of needing to charge much higher rents in order to clear the hurdle imposed by lenders.
Again, though lenders who put in a little more thought, and who embrace a versatile approach, can support them achieve those purchases.
At Mansfield we recently relaunched our limited company landlord range with the intention of addressing this challenge. For example, utilising a higher percentage fee meant we could charge a lower rate on the discounted rate product, lowering the ICR hurdle for landlords.
This was followed by the launch of longer fixed rates, again built so that landlords can thrive during the challenging affordability environment.
Understanding borrowers
If lenders are to support these would-be borrowers, they have to take the time to get to know them.
That means understanding not only where this purchase demand is coming from, but also what products are going to be needed to help the transactions to take place.
It’s therefore crucial for brokers to recognise the lenders who are keen to do business, and who have built the product range that will make the biggest difference to their clients. That means looking beyond the big names and considering smaller, more flexible lenders.
