Will Norrington - Insurance Broker
As we find ourselves in unfamiliar and uncertain times, many people ask me what the future holds for the property market and how it will be affected by COVID-19. One client in particular who is looking to take his first steps onto the investment property ladder has been firing question after question, in a bid to get some understanding on whether he is right to continue with his property ambitions, or if this virus has thwarted any chance of him making a success out of property.
Now obviously none of us can claim to be a Mystic Meg with her crystal ball and have the answers on WHAT WILL AND WILL NOT HAPPEN, but I do, however, have my opinions on what may or may not.
Is this a good time to invest in property?
Even at the best of times, I don’t believe anyone can answer that question; you never know what’s around the corner. But if you’re asking me if it is a good time to CONSIDER investing in property, whilst we isolate at home and look at our options? Absolutely! If we manage to bounce back from this pandemic, we might as well be well equipped with the ammunition and know how to embark on our property adventures.
Will property prices crash as a result of COVID-19?
This is impossible to answer. However, many live in hope (including myself) that any dip in prices will hopefully be short lived and will bounce back due to the demand of buyers. As of writing this, I am fortunate to be able to say that I haven’t had a single client back out or re-negotiate a deal. All my clients are showing strong commitment. As long as unemployment doesn’t grow too high and the banks don’t hike the interest rates up too much, we have a fighting chance of ‘bouncing back’.
Will I be able to get the funding I need?
Whilst there have been many changes to many banks lending criteria, there are still plenty of mortgage products and options out there for the property investor and in particular first time investors.
Will I be affected as a first-time landlord?
No more than any other property buyer, residential or buy-to-let. Even at the best of times there are things to consider as a first-time landlord, before the pandemic, as well as additional considerations with the situation we now find ourselves in.
But first let’s take a trip back in time, as hard as it may seem, before the pandemic!
Even before Covid-19 there were still many challenges that faced first-time landlords. One of the first and most common is that some high street lenders are reluctant to lend to first time landlords and especially those who also are not owner/occupiers.
This can mean that the rate on offer might not be as competitive as the high street banks, but with the BoE (Bank of England) base rate at an all time low, the gaps between high street banks and specialist lenders rates are closing and there are still some great products on offer out there to take advantage of, which will help you take that first step on the property investment ladder. There are many more things to factor in when considering buy-to-let purchases: proof of income, credit history, proof and source of deposit to name a few, but again each lender can differ in terms of their criteria. For example, although most lenders will want proof of income, there are a select few who do not and are happy to consider the application based on the monthly rental value. The same with credit history. Most lenders offering the best deals will want to see good credit history, with no adverse credit. But again, that doesn’t mean to say its not possible for you to get a buy-to-let mortgage if you have adverse credit. There are still lenders out there that will ‘listen to your story’.
These are just a few examples of what to expect from the buy to let market for first-time landlords, and they STILL apply in today’s market whilst we battle this pandemic.
So how has the pandemic affected the mortgage process?
It’s mainly product availability. The pandemic has rendered us in a lockdown. The lockdown has forced mortgage surveyors and valuers to isolate, thus resulting in many of the banks unable to use physical valuations when assessing the mortgaged property and therefore withdrawing lots of the products. However, thanks to technology and the ability to value properties remotely, lenders are using ‘desk-top valuations’ to keep the wheels of the property-purchasing process moving, which is resulting in lots of lenders reinstating some of their mortgage products once more.
So for some lucky investors it’s business as usual as long as their required product range is generally unchanged. But for others that are looking for a certain loan amount and LTV, they may have a waiting game to play.
For anyone looking for answers as to whether they can or should go ahead with a mortgage application, my advice is this: speak to a whole-of-market mortgage adviser who can fully assess your needs and circumstances and help decide if and when the time is right for you to make the first - or next step - on the property-investment ladder.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up the mortgage repayments.
