Later Life

Criteria searches show volatility in equity release market: Knowledge Bank

Rozi Jones
8th October 2020
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"As we look forward, with furlough coming to an end, we may see more searches for people that have defaults, like we are seeing in the second charge market now."

The equity release market showed the most change across all seven categories recorded by Knowledge Bank in its latest criteria tracker.

‘Maximum Loan Amount’ was the only consistent search in the top five results. With limited high LTVs from mainstream lenders on the table for younger borrowers, Knowledge Bank says many homeowners may be releasing equity in order to help younger family members get onto the property ladder.

A spike in searches for ‘Property with Annex/Outbuildings/Land/Acreage’ was the third highest search result. A number of people took their elderly parents or relatives out of residential homes during lockdown and brought them into the family home amid concerns of the spread of the virus becoming prevalent inside such institutions. Knowledge Bank is now seeing the broader impact this is having on the housing market, as its statistics show that people are considering building onto existing property in order to accommodate intergenerational living.

In the residential market, ‘Temporary Maximum LTV Restrictions’ is once again in the top five search results showing that lenders continuing to tighten criteria is still a significant issue for people with smaller deposits.

The residential market also saw ‘Income Multiple used for Affordability Assessment’ for the first time, signifying that people are worrying about their affordability; this won’t be helped as the furlough scheme comes to an end this month. This may also explain why, in the second charge market, a spike in searches for ‘Married Couple Application in One/Single Name’ appears. This could be as a result of one partner having poor credit or having been placed on furlough and lenders tightening their leniency with calculating furloughed income.

People are also using second charges to raise finance, with the top three searches being ‘Maximum LTV’ ‘Covid-19: Temporary Maximum LTV Restrictions,’ and ‘Defaults – Registered in the last three years’. This shows second charge loans being predominantly used by people facing financial problems.

Buy-to-let saw the most consistency, with the top five searches remaining unchanged in September. ‘First Time Landlord’ takes the top spot this month. As lenders tighten their appetite for risk, first-time buyers or renters struggling to get onto the property ladder may consider buying buy-to-let properties instead of their own home.

Matthew Corker, lender relationship manager at Knowledge Bank, commented: “The overarching theme here is that people are needing to borrow more money at the very point that lenders are tightening criteria. The equity release market saw the highest levels of disruption in September, which is due to changing consumer habits as a direct result of Covid-19. The shortage of high LTV mortgages offered by lenders could well be leading to parents or relatives releasing equity to help younger family members get onto the ladder.

“As we look forward, with furlough coming to an end, we may see more searches for people that have defaults, like we are seeing in the second charge market now.

“We may also see more people buying property with elderly relatives to avoid putting them in care homes, and generations joining forces in order to get younger relatives onto the property ladder. Perhaps intergenerational living could soon become the new normal.”

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