The mortgage/property market marches on regardless and with the stamp duty holiday deadline now looming very large I felt it was timely to recap some things you will want to consider if you want to take advantage of the stamp duty holiday.
I am sure the joyous news that Lockdown has been extended and School’s won’t reopen until at least 8th March, was met with rapturous delight from all parents… Yet again I forgot to get a haircut before things shutdown so on top of all the challenges this will bring I suspect Ill come out of lockdown resembling Laurence Llewellyn Bowen at this rate…
In reality we are all pretty accustomed to this now, so what is a few more weeks in the scheme of things. That’s the stance I am taking anyway.
Aside from all that rambling, let’s see what you’ll need to consider if you want to take advantage of the stamp duty holiday.
Speed of the lender
A general relationship in the mortgage world is:
The lower the mortgage rates on offer = the slower the lender
The reason is obvious, if a lender is market leading, they will of course have the most applications to process. In a lockdown world, that means applications can not be processed as fast as they were, so lenders tend to ease up.
So sometimes going one or two products off the top means you can get an offer in a week (or less) compared to it taking 6-8 weeks if you go with a ‘cheaper’ lender. If it takes 8 weeks to get a mortgage offer now, that could cost you up to £15,000 in extra stamp duty charges.
To us, it seems common sense to pay £5-10 more a month on your mortgage (as that is all the difference really is) in order to hit the 31st March deadline. If you want to buy before this point, that is a dynamic you are going to have to accept.
GET A GOOD SOLICITOR!
No, my Caps Lock did not get stuck, I just wanted to emphasize just how important this part of the process is. Even if you pick the right lender, everything can be undone if your solicitor drags their heels.
To this day, we still experience solicitors who send letters, work off faxes and are next to impossible to talk too. Yes, you can find a very cheap online option but exactly as per the above, is it worth it?
There are very real challenges in parts of the legal process currently – local authority searches are taking an age to return, even if your solicitor is great, you are reliant on the other side’s firm etc. So our simple advice is – PAY FOR A GOOD FIRM and get a recommendation where possible. Google reviews are a great way to sense check a firm you want to instruct as are taking recommendations from your estate agent or broker as they will know the good local firms.
Access to products
This is where good brokers really earn their stripes as many arrangements are only accessible via brokers currently as lenders struggle to cope with demand. As brokers take the risk of the advice and also expertly package the case up, lenders are very happy outsourcing certain products to control the level of business and reduce processing burden. These areas are typically:
- Smaller deposits – 5/10/15% deposit deals
- As a broker we have access to cheaper rates and higher loan amounts in this area. Especially valuable when you are looking to move.
- More generous affordability calculations
- This means that we can get loans of up to 5.5x your income whereas the market average is around 4.5x your income.
- We have some lenders who purely take a ‘common sense’ approach to underwriting, so they have no formal rules but will just look at the merits of a case (and you don’t have to pay a large premium on the rate).
- Remortgage Packages
- We can speed up the process and keep costs down as many lenders offer lower rates, free surveys and free legal work when you come to remortgage.
- Buy To Let
We have access to many lenders who do not deal with the public so we can achieve larger loans, or get lower rates for that reason. Also if you are looking at more specialist areas such as having a large portfolio or owning via a Ltd Company, we have great options for that.
Market Rates slightly down for the first time in a while, although no great movements seen or expected in the next few weeks.
That said, lenders are offering rates at quite a high margin over market rates, (especially where there is a 25% deposit or less) so we still feel keeping your mortgage options short term will save you the money in the long run.
In the last week:
3 Month Sterling Libor = flat at 0.037%
2 Year SWAP = down by 0.013% to 0.084%
5 Year SWAP = down by 0.030% to 0.250%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 1.19%
2 Year Fixed Rates from 1.04%
5 Year Fixed Rates from 1.24%
BTL Rates from 1.19%
The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
Source: Twenty7Tec February 2021
If you have any questions on the points raised here on the Stamp Duty holiday, or any mortgage goal that you may have, please do pick up with one of the team who would be delighted to help.