Email BLG [email protected] Call BLG 01483949494
Mortgage Borrowing At The Highest It Has Ever Been

Mortgage Borrowing At The Highest It Has Ever Been

by | May 21, 2021 | Advice, COVID-19, Latest News

Recent news that mortgage borrowing has reached an all-time high is great news for developers and those looking to sell their homes or other properties. The record high shows that more people are moving home and suggests a shift away from renting towards buying. There are many reasons for this change including the extended stamp duty holiday, but the impact that this will have on the housing market in months to come is still being assessed.
In March 2021, according to the Bank of England, the population borrowed £11.8 billion more on mortgages than they repaid, with a gross mortgage borrowing of £35.6 billion. This has put net borrowing at its monthly highest since the start of recording comparable modern data in 1993. The current low Bank of England interest rates directly resulted in low mortgage rates, making borrowing and mortgages even more popular.

Eighty-three thousand new mortgages were approved in March, which is up from 73,000 mortgage loans approved in February 2020, at the start of the Coronavirus pandemic and first national lockdown, showing an increase in those looking to move home

During this time, the production and manufacturing industries including those focused on building new commercial and residential properties have continued to steadily grow for the eleventh month in a row. This suggests that the new properties looking to go on the market in the coming months are going to be met with huge demand which in turn raises prices.

A Market Boom

Due to the increase in borrowing, property prices are also on the increase, with Nationwide Building Society announcing an average price increase of almost £16,000 for the year ending April. This puts the average house price at nearly £240,000 and is expected to continue rising this year.

Economists believe that the market boom is mainly being fuelled by high-income groups, whose jobs were not affected by the pandemic. This also suggests an increased demand for higher-end homes, more complex and unique builds, or investment properties as this is unlikely to be the first home of someone within this group.

The Stamp Duty Break Extended Until June

The stamp duty holiday, which has been repeatedly extended during the period of the pandemic, continues to see homebuyers rushing to take advantage of it before it expires. The stamp duty holiday was extended until June 30th, 2021, and the buyers demand does not seem to slowing.

The tax rate will increase through July, August, and September, ending on September 30th, 2021. The stamp duty will then return to normal pre-COVID-19 levels on October 1st, 2021. Due to this it is expected that the housing market will slow during these months in comparison which could in turn cause a drop in prices but the long-term impact of this is still being monitored with much debate surround the ‘post covid’ housing market.

If you are looking to complete your build please get in touch with BLG to see how our finance options can help.

Who Is Eligible For Build To Let Development Finance

Who Is Eligible For Build To Let Development Finance

by | May 21, 2021 | Latest News, Advice, COVID-19

Whether you’re a first-time investor or an experienced property developer, delving into the lucrative rental market often requires financial support. The build to let finance option provides a tailored solution for those seeking long-term returns through rental properties.

The build to let development finance is used to fund the project during the build phase. Once the build is completed, the investor or developer will exit onto a standard buy to let product. Where five to ten apartments exist in a building, a single standard buy-to-let mortgage is typically available. When there are more than ten apartments and additional facilities, such as an on-site gym, then a specialist commercial buy to let product will be called for.

To fund the project during the build phase, investors and developers often turn to build to let development finance, transitioning to a standard buy to let product upon completion.

Eligibility

When considering build to let finance, adherence to specific eligibility criteria becomes paramount. Lenders meticulously evaluate various factors to ensure the viability and success of the project. The lending criteria for build to let funding is evidence of a strong exit strategy, which is typically a buy to let mortgage that is agreed in principle. Here’s a detailed exploration of the key eligibility criteria:

Strong Exit Strategy: A fundamental requirement for accessing build to let finance is the demonstration of a robust exit strategy. This often takes the form of a pre-approved buy to let mortgage. This strategic plan outlines how the investor or developer intends to transition from the initial funding phase to a standard buy to let product upon project completion.

Track Record and Experience: Investors and developers with a proven track record in the sector and a history of successful developments enhance their eligibility. Previous experience in navigating the intricacies of property development is a valuable asset, instilling confidence in lenders regarding the project’s potential for success.

Comprehensive Business Plan: The submission of a well-structured business plan is a critical component of eligibility. This plan should go beyond a mere overview, delving into key metrics such as occupancy forecasts and rental projections. A comprehensive business plan not only outlines the project’s financial viability but also showcases the investor or developer’s strategic vision.

Creditworthiness: While good credit is generally preferred, lenders understand that certain circumstances may lead to less-than-perfect credit histories. In such cases, eligibility is still possible, provided the poor credit does not pose a significant threat to the exit strategy. Lenders may assess the overall financial health and stability of the applicant.

Security and Deposit: Offering good security and a deposit higher than the minimum requirement are viewed as indicators of lower risk. A higher deposit showcases the applicant’s commitment and financial stability, strengthening eligibility. Security, in the form of collateral or assets, provides assurance to lenders and mitigates potential risks associated with the financing.

Understanding and fulfilling these eligibility criteria not only increases the likelihood of securing build to let finance but also sets the stage for a successful and sustainable project in the competitive property market. Aspiring investors and developers are encouraged to work closely with financial experts and advisors to navigate the intricacies of the application process and optimise their eligibility for build to let finance.

Strengthening Your Position

There are strategic avenues for those seeking to fortify their eligibility or address capital shortfalls. Here, we delve into alternative options designed to strengthen your financial position:

Bridging Loans: Bridging loans serve as invaluable short-term solutions, especially when some capital is available but falls short of the project’s requirements. These loans provide the flexibility to swiftly acquire a portion of the site, facilitating progress while the investor or developer works towards securing additional funding. Bridging loans act as a financial bridge, enabling seamless movement from one phase of the project to the next.

Equity Release: A strategic approach involves tapping into the equity within your existing investment portfolio. By remortgaging properties, investors and developers can unlock additional funds to bolster their financial capacity. Equity release allows for the efficient utilisation of existing assets to secure the necessary resources for the build to let project. This option leverages the accrued value of your properties, providing a dynamic source of financing.

Unsecured Business Loans: For those seeking a supplementary financial boost of up to £25,000, unsecured business loans present a viable solution. These loans, not backed by specific collateral, offer flexibility and a streamlined application process. While the loan amount may be relatively smaller compared to other financing options, unsecured business loans serve as a convenient top-up, filling gaps in capital and supporting various project-related expenses.

Considering these alternative options allows investors and developers to adapt to the ever-evolving financial landscape of property development. Each avenue offers a distinct set of advantages, catering to specific needs and circumstances. It is crucial to carefully assess your financial requirements, risk tolerance, and overall project goals when determining which alternative option aligns best with your unique situation.

Collaborating with financial experts and advisors is advisable to navigate the nuances of each alternative, ensuring informed decision-making. By strategically utilising bridging loans, equity release, or unsecured business loans, you can fortify your financial position, enhancing your ability to embark on successful build to let projects with confidence and resilience.

Important Considerations

Before embarking on a buy to let project, it’s crucial to be aware of key factors, such as potential challenges in finding buyers, higher interest rates for short-term finance, and the time it might take for rental incomes to materialise.

For tailored advice and information on build to let finance, landlords and property developers are encouraged to reach out to the experienced team at BLG. Their expertise can guide you through the intricacies of financing, ensuring your project’s success in the competitive rental market. For more information on build to let finance for landlords and residential property developers, please contact the BLG team.

Are First Time Buyers Suffering Because Of COVID-19?

Are First Time Buyers Suffering Because Of COVID-19?

by | Apr 23, 2021 | Latest News, Advice, COVID-19

COVID-19 has changed the economic position of individuals and businesses significantly within the UK. First time buyers have not been spared from the financial impact of COVID-19, and this demographic has always come up against major challenges when attempting to get their first foot on the property ladder.

The most significant challenges for first time buyers are well known and include saving enough money for the deposit and earning a high enough salary to attain the necessary mortgage.

The Coronavirus pandemic and the job and wage insecurity it causes have put lenders in a position where they are increasingly cautious about lending, and in particular with first time buyers. 

According to a recent survey conducted by Trussle:

  • 65% of first time buyers say they feel it is impossible to get on the property ladder, with 62% deciding to delay their home-buying efforts and save for a further year.

 

An Increasingly Confusing Housing Market

The changing lending criteria and deposit requirements are leaving the first time buyer confused, also evidenced in the Trussle survey:

  • 76% of first time buyers in the UK say they feel confused, angered, and worried about how COVID-19 has affected their home ownership prospects.

The number of lending products for first time buyers is down. There are now fewer high Loan To Value (LTV) mortgages, and fewer than 4% of mortgage deals with an LTV of over 90%, compared to this time last year.

It is not all bad news because other financial support for first time buyers remains in place. The Help to Buy, Right to Buy/Acquire, and Shared Ownership Schemes are three examples of the financial support available. Furthermore, Chancellor Rishi Sunak once again extended the Stamp Duty Holiday (originally planned to end on March 31st, 2021). The Stamp Duty Holiday will now come to an end in June 2021, with a tapering off period that will run to the end of September and will save home buyers up to £15,000.

However, first time buyers may still need to look further afield in more affordable areas and consider if working from home is a viable long-term option for them before making a purchasing decision.

 

Post COVID Outlook

While property viewings, valuations, and sales continued through the latest bout of lockdown measures, the housing market’s recovery can only be achieved by including the buying power of the first time home buyer.

Property availability continues to be an issue. COVID-19 is adding three to eight months to new residential development build times, delaying the completion of 250,000 homes. However, residential development finance is helping property developers acquire financing and complete projects, which will ultimately improve availability.

For more information on the help available for first time buyers and residential property developers, please contact the BLG team.

The Increased Demand For Housing In The UK

The Increased Demand For Housing In The UK

by | Apr 21, 2021 | Advice, Latest News

2020 and 2021 have so far been two years like no other, with challenges and changes on a UK and global level. However, the latest government and industry statistics show a housing demand increase in the UK, showing the population’s resilience and change in lifestyle values.

So, what do the statistics for housing market supply and demand show?

  • Housing demand in 2021 is up 6% – According to Estate Agency Get Agent, their latest index shows that demand has risen in the first quarter of 2021 by 5.7%. The highest demand is seen in Bournemouth, Newcastle, Oxford, Bristol, Glasgow, Sheffield, Leeds, and Plymouth, with London showing its first signs of higher housing demand, following the rises seen elsewhere.
  • Housing demand in 2020 was up 40% – According to Zoopla, demand in 2020 was 40% higher than in 2019.
  • November 2020 house sales were up 20% over 2019 – HMRC recorded 115,190 house sales in November 2020, which is up 19.3% from November 2019.

House prices and mortgage approvals are also on the rise:

  • House prices rose 7.5% in 2020 – According to the Office of National Statistics (ONS), house prices have increased by 7.5% over the year up to January 2021, with the highest price growth seen in rural areas.
  • Mortgage approvals are at their highest since 2007 – According to figures from the Bank of England, the highest number of mortgage approvals were recorded in November 2020. Mortgage approvals are at their highest since August 2007.

 

What Has Led To The Increase In Demand

The increase in housing demand is broadly believed to be in response to two significant events that occurred in 2020:

  1. COVID-19 pushes lifestyle priorities towards more space – The Coronavirus pandemic has changed the way that people work, with a large shift to remote working from home, increasing demand for larger properties with a higher number of rooms to accommodate home offices. Furthermore, with restrictions on socialising indoors and in groups, more outside space is a top priority for many home buyers. The combination of these desires for more space is reflected in a change where demand is strongest, with rural properties and houses in higher demand than city apartments and flats.
  2. The Stamp Duty holiday significantly lowers the cost of buying a home – In England, the Stamp Duty holiday was introduced in July 2020 (July 15th in Scotland and July 27th in Wales). This tax break was set to end on March 31st, 2021. However, the Chancellor of the Exchequer has announced that the Stamp Duty holiday will be extended to June 30th, keeping the higher threshold before Stamp Duty is applied.

 

Can Supply Meet Demand?

Housing supply and demand are often in an imbalance, with demand higher than supply. However, access to residential development finance helps developers acquire the financing they need to build or convert one home to hundreds.

BLG continues to support developers with residential development finance, and our team of experts are waiting to help you get your next project underway.

The Impact COVID-19 Has Had On Development Finance

The Impact COVID-19 Has Had On Development Finance

by | Apr 1, 2021 | Latest News, Advice

The UK economy has been hit hard in 2020 and 2021 as it feels the impact of COVID-19. The Coronavirus pandemic and a turbulent marketplace have hit the housing market hard, and the availability of property development finance has contracted in response.

When residential and commercial building valuations are less predictable, and exit strategies are less certain, traditional banks become cautious and wary of lending or demand more equity to mitigate lending risks.

Consumer and business spending is below pre-coronavirus levels and could remain so for years to come if access to property development finance is restricted. However, if development finance is accessible and sensibly qualified, the recovery scenario looks much more positive, with property development loans aiding reform and accelerating post-pandemic recovery.

One stimulus that has been introduced to help tackle this difficult time is the government-backed Coronavirus Business Interruption Loan Scheme (CBILS). CBILS offers finance of up to £5m over two years, for SMEs with an annual turnover of up to £45m.

The business loan is for businesses losing revenue or experiencing cash flow disruption as a result of the pandemic. BLG is a scheme partner, bolstering funding availability alongside our usual property-secured loans for businesses that meet the scheme’s criteria.

Residential Development Finance

With a viable borrowing residential development finance proposal that meets our standard lending criteria, residential property developers can access CBILS development finance through BLG.

Whether you apply for funding through the scheme or not, residential developers should put greater focus on contingency planning.

The additional challenges that have come about because of COVID-19 include higher employee sickness levels and the unavailability of key staff members. There may also be a loosening or tightening of restrictions on the number of staff, partners, and contractors allowed on site, which can delay building projects.

According to the government’s housing accelerator, Homes England, the pandemic has added between three to eight months to build times, delaying the completion of almost a quarter of a million homes.

BLG will work with you to find the best residential development finance solution to help you tackle the challenges that lie ahead.

Commercial Development

The demand for commercial premises is greater as businesses look to secure additional warehouse space to protect their supply chain from disruption risks and in response to the current boom in eCommerce.

Commercial property developers have access to BLG’s standard development finance solutions in addition to CBILS funding. Your business must have a viable borrowing commercial development finance proposal and meet our normal lending criteria to access development finance.

BLG is a specialist lender in short-term loans and is dedicated to supporting your individual needs with flexible loan structures for both new and existing customers.

Contact the BLG development finance team today to access funding for your next development project

The Impact Of Brexit On The Housing Market

The Impact Of Brexit On The Housing Market

by | Jan 28, 2021 | Latest News

While it looked like a deal may not happen, the UK finally left the EU after a last-minute Christmas Eve trade deal. Now we are on the other side; it is time to consider what will happen to the housing market.

During the transition period, the predicted crash in property prices never really materialised, although there has been a readjustment to counter confidence in the South East and London. The housing market’s performance so far has been good news for homeowners worried about venturing into negative equity. For now, demand continues to exceed supply, and while this continues, house prices will rise.

 

The Impact On Development Finance

The property market has always been seen as a safe haven and leading form of property development finance, particularly in times of economic uncertainty, such as that created by the referendum or a snap General Election. The UK housing market consistently offers stability and security for medium and long-term investments. It is recognised as more reliable than investing in bonds, shares, and stocks, which is all good news for property investors and developers.

Brexit may have created a weakness in the Pound, but this encourages foreign investment in residential and commercial property. As such, house prices have continued to rise steadily since pre-referendum times. Statistics from the UK House Price Index show that as of November 2020, house prices have risen by 7.6% compared to the previous year.

It is fair to say that the COVID-19 epidemic has so far impacted the housing market more significantly than Brexit. The first national lockdown saw housing transactions drop to 40,000 in April 2020. As restrictions were eased, transactions rose to 100,000 in October 2020.

Since the summer of 2020, various factors have fuelled activity in the housing market. Low mortgage rates and bridging loan rates have facilitated activity from private owners, property investors, and developers.

 

Looking To The Future

Looking into the future, there is nothing to suggest that the Brexit housing market will see the growth in property prices stall. Another national lockdown continues to drive sales as people search for better lockdown experiences. The current stamp duty holiday, introduced to support buyers during the epidemic, has reduced the tax buyers must pay and will continue to have a positive effect until the holiday ends on March 31st, 2021. The housing market will likely see fewer transactions in April and May 2021, when normal stamp duty levies return.

During 2020, one in five households in the UK were part of the private rented sector. This number is expected to rise to one in four by the end of 2021. This reflects the desire of more middle-aged and retirees opting for lifestyle flexibility, which is good news for landlords and developers converting properties into HMOs (House in Multiple Occupation).

All indications so far are that the UK’s housing market is safe, property prices will rise, and the number of renters will increase.

    Quick Enquiry?

    We’re here to help.