"If I was a gambling person, I would be 80% positive that they will extend the deadline, but only for cases that are already in flight."
In the latest edition of Brightstar's Vlog, CEO Rob Jupp was joined by Louisa Sedgwick, managing director of mortgages at Vida Homeloans, to discuss her views and predictions on the upcoming stamp duty deadline, amongst other topics.
When asked whether the government would stick to its 31st March stamp duty deadline for buyers who have exchanged contracts, Louisa said: "If I was a gambling person, I would be 80% positive that they will extend the deadline, but only for cases that are already in flight. I don't expect them to extend the deadline to new applications, just to those who have either exchanged contracts or have had an offer.
"I do think that they're likely to extend the deadline, but not for new applications."
Agreeing that the deadline should remain in place for new applications, Rob added that the "UK legal industry just won't be able to control and deal with the volume of transactions. It's not their fault, it's just a capacity issue".
When asked when she would expect any announcement on an extension to be made, Louisa said "I wouldn't expect anything before the end of January, into early February. I can't see it being an early call on that one, I think there's a lot to play through first. They'll need evidence of the size of the issue and the impact that it will have on the economy because it's not just the stamp duty piece, it's all the associated moving costs that go with that and of course the tax revenue that's accumulated through those moving costs would be a big loss if they didn't extend it."
Rob reiterated that the anticipated extension is currently speculation, and that everyone in the industry should prepare for a 31st March deadline until told otherwise.
When asked if Vida plans to diversify in the months and years ahead, Louisa said: "In the coming months we'll stick to the knitting. We need to get better at what we do. We need to service our customers better and we need to make sure that we can follow through on our promises.
"We've made no secret of the fact that ideally we would like to transition to a bank at some point, then ideally we would look to perhaps offer some additional services. For the next year to 18 months we will just get better at what we do. Once we master that we can go forward and offer some alternatives as well."
Rob then asked whether, due to Covid, the specialist lending market would get bigger in the next two years. Louisa responded: "I think it's inevitable. Every piece of news you read about people unfortunately losing their jobs and then ultimately finding themselves in greater debt etc, I think it's inevitable that we're going to see some more customers who are going to need servicing by the specialist lending community."
Louisa added that she hasn't seen "any of the larger, mainstream lenders wanting to play in that specialist world" and that as a result, smaller firms could diversify into the specialist market in 2021.
She said: "I think the current incumbents will get better at what they do, but it wouldn't surprise me if we didn't see some of the smaller banks move into the specialist world."
However, she doesn't foresee any brand new specialist lenders coming to the market, explaining that the "cost of entry is enormous so unless you've got support of somebody with very deep pockets, and/or infrastructure that supports weird and wonderful underwriting, etc, I just don't see it happening because it's so expensive."
Finally, Rob asked what mortgage intermediaries should be doing differently in 2021 in order to continue to thrive. Louisa said: "I think it needs to be a refocus, so what do their strategies look like on the 1st of April? Because come the 31st of March, if we don't see any extension to the Stamp Duty Land Tax, or we don't then see it being offered out to new customers, what does the world look like? It's going to look tremendously different and they need to think about their strategies and build that into any proposition they've got going forward.
"Have they got a customer base that they can go and revisit? The chances are they probably have, and next year is a big year for remortgage business - they need to think about how that fits in with their current portfolio or customers because I think they've been largely left alone this year."
Louisa said it "might not be a cliff edge" from the 1st of April, but "it's certainly going to be a drop in transactions after the 31st of March without a doubt".
To watch the full interview, visit https://vimeo.com/491705168.
