"Alongside using second charge loans for business purposes, more and more borrowers are looking into the option of building their own home."
The latest Knowledge Bank criteria tracker found brokers were searching for ‘capital raising for business purposes’ in December.
Alongside raising money for business purposes, brokers were also searching for ‘capital raising for debt consolidation’. This provides further evidence that some individuals have struggled financially due to the disruption caused by the pandemic.
While some of these searches may be connected to the disruption caused by staff having to isolate, there will be others using second charge mortgages for positive reasons, such as to make improvements or renovations to offices. With the shift to working from home prevalent across industries, some businesses are reassessing their office needs and re-organising spaces to maximise efficiency.
Searches in the buy-to-let and residential sectors remained relatively stable from November. With house prices still rising, searches for ‘maximum age at end of term’ and ‘income multiple used for affordability assessment’ were both popular in the residential market.
While age related searches are common for residential products, maximum age is rarely searched a factor in the buy-to-let market. However, December marked the first month ever in which ‘maximum age at end of term’ featured in the most-searched terms in the buy-to-let market.
With the stock market still relatively volatile and house prices continuing to rise, some older investors may be looking to the buy-to-let market as an integral part of their retirement planning.
In the equity release sector leaseholds were of interest to brokers and their clients. This perhaps was sparked by the second reading of the Leasehold Reform (Ground Rent) Bill in the House of Commons which took place on the 29th November last year. The bill is set to put an end to ground rents for new and qualifying long residential leasehold properties.
Of particular interest was any remaining leasehold, with brokers searching for ‘leasehold remaining at end of mortgage’ and ‘leasehold remaining at beginning of term’. Some of the borrowers looking to use equity release may be looking to use the funds to undertake fire safety measures, such as removal of cladding.
‘Regulated bridging’ remains a popular search in the bridging market, with December marking the seventh time in the previous eight months that it has occupied the top-searched spot. Buyers still outnumber sellers considerably and, as a result, some are using bridging loans to purchase a property before theirs has sold.
Matthew Corker, operations director at Knowledge Bank, commented: “By looking at the searches brokers conducted in December, it is clear many business owners were looking to use property to raise capital. The interesting question is why?
“These searches could indicate disruption caused by the pandemic is still harming a number of industries. However, the flip side is that some of these businesses may be using second charge mortgages to adapt and take advantage of opportunities.
“Alongside using second charge loans for business purposes, more and more borrowers are looking into the option of building their own home. The relaxed rules around brownfield sites announced in the Autumn Budget may have sparked the interest in lending against land, as the changes will result in more opportunities for self-building.
“Searches in the bridging sector were predominantly for regulated loans, as despite the end of the stamp duty holiday, buyers are still under pressure as sellers now have a choice of bids. Those that have already agreed a bridging loan are therefore well-placed as they can move regardless of when their property sells.”
