Lending in lockdown two – is it different this time?

Bumps in the road

November’s lockdown differs in one key aspect: much of the necessary activity in the property market has been allowed to continue. For now, property transactions can still go ahead and vital parts of the process, such as physical property inspections and valuations, have been allowed to continue. Nevertheless, there are lessons we can learn from earlier this year.

When the housing market opened up again in May we saw a property boom as transactions took off and house prices surged to record highs. It’s likely this growth came as a result of several factors, including the release of pent-up demand following lockdown and a desire to take advantage of the stamp duty holiday. Both of these factors look set to play a role following the second lockdown, though to a lesser extent.

Although house viewings and surveying are still permitted, unlike last time, we might still see a slowdown in transaction figures as people take a step back and look to limit outside contact. Covid cases have naturally created some apprehension, dampening consumer demand and forcing the more vulnerable buyers and sellers to isolate. While we may see a similar pattern of slowdown, followed by a release of demand post-lockdown, it’s likely that this will be less dramatic than earlier in the year.

Additionally, while furlough and mortgage repayment holidays have been extended, there are still many consumers who are struggling financially, including those who have reached the end of their mortgage deferral limit. The latest figures from the ONS also show that unemployment has continued to increase slightly into September. All of which points to a potentially reduced post-lockdown bump in transactions.

The stamp duty cliff edge

The stamp duty holiday has been another key factor behind the strong growth of the market in recent months and one that will still be present once this second lockdown ends. And, with the deadline looming, we may see a rush from buyers looking to take advantage of this ahead of the cliff edge in March.

When dealing with borrowers who want to execute transactions quickly, it is important for brokers to be aware of the spectrum of products available which can expedite the transaction process. For example, short-term lending solutions such as bridging loans can help ensure homebuyers are able to achieve their home ownership dreams within the deadline. As a result, it’s likely we’ll see increasing demand for bridging loans in the coming months, so it’s vital for brokers to be considering now whether their clients’ purchases will go through in time and whether alternative solutions are a viable option.

However, not every transaction will be able to complete before March 31st due to the high levels of activity so far this year combined with necessary social distancing requirements which have slowed certain parts of the moving process. Solicitors are also having to deal with a huge number of transactions and all the necessary work that goes with it. This could dampen any potential market bump by the end of March.

Technology will continue to be key

The first lockdown spurred the industry to rapidly evolve digital solutions, which will once again be pivotal as lockdown returns. Accelerating cases of Covid-19 will mean many prospective borrowers will want to keep viewings virtual, if not put them on hold completely.

Valuations may also be affected by the lockdown, though many surveyors are continuing with physical inspections this time round. Nevertheless, some lenders will again have to rely on the remote and desktop valuations which have been widely adopted this year, particularly if consumer demand continues to outstrip surveyor supply.

Lenders have worked hard to streamline their technological solutions this year, largely in response to Covid. The lessons learned and systems developed at the start of the year will be vital in keeping the borrowing process as efficient and streamlined as possible.

The coming spring

While superficially the demands of lending in lockdown two appear very similar to those faced back in March, there are a number of important market differences. Lockdown two is not the wholly unprecedented challenge that the market faced earlier this year and the property industry has worked hard this year to be able to operate safely and efficiently during a pandemic.

While there are still many unknowns, including a Brexit deadline and a Stamp Duty cliff edge, there are reasons to be optimistic. Not least because the prospect of a successful vaccine in 2021 means that a return to some normality may not be too far away.