As we move into September many people will be finding their payment holidays coming to an end, be it overdrafts, credit cards or mortgages. With the current economic climate looking turbulent to say the least and unemployment highly likely to rise throughout the rest of 2020 as the government’s furlough scheme finishes at the end of October.
Borrowers looking to get ahead of the curve and avoid any unnecessary interest could save themselves some money by switching to a new product with a lower interest rate. The mortgage is extremely likely to be the largest monthly outgoing for a homeowner and therefore making sure you have the best deal available is imperative when looking into cost savings. With mortgage rates remaining at incredibly low levels there has never been a better opportunity to make savings.
We would carry out a free mortgage health check to see if a client would benefit from switching mortgage products, as there are a number of factors to consider when working out what the cheapest options is going forward.
The mortgage market continues to be a difficult arena to navigate with lenders criteria changing regularly. Those that have taken a mortgage payment holiday or been on furlough may find it more difficult to remortgage than they have previously. Some lenders have started to not accept furlough as income for a mortgage application for example. Borrowers who are able to resume full repayments are encouraged to do this as quickly as they are able, while consumers taking payment holidays or reduced payments should keep in mind that interest continues to be accumulated during this period.
As part of our mortgage health check process we will be able to advise on what options are available and whether or not this would be beneficial in the long run for the client.
And for those that now need to take a mortgage payment holiday these remain open for applications until 31 October 2020. Consumers who are struggling to meet mortgage repayments should contact their lender immediately to discuss their options. Those who are struggling with debt can also get information and support from Citizen Advice or a free debt charity.
Your Key Move was founded by Carlo and David because they both had experienced poor customer service from estate agents and thought they could do better.
They both realised that a large online estate agent is too impersonal and can never provide the local knowledge or customer service required. Equally a local agent can be very ineffective slow and has higher costs.
So why not combine the benefits of the two? A local online estate agent with excellent customer service and all the cost-saving advantages of a bigger online agent passed onto the customer.
Your Key Move was borne to provide the traditional customer service of a local agent combined with the excellent value of an online agent.
To get the best of both worlds for a customer we needed to offer excellent prices and service. Because we don't have the overheads that traditional estate agent we can compete on price and because we have designed our business processes from the ground up we know we can be efficient and cost-effective.
What matters which is getting the customer's property sold for the right price while delivering excellent value and service.
Customers, value good service. This means offering a reliable, punctual, reactive, and consistent service. As people don’t move homes that often it may be difficult to compare and contrast the experiences they have had unless they are unusually good or bad.
Customers may not have experienced effective, friendly customer service until they have tried Your Key Move.
Most customers are not driven by the price charged or the commission but will select their agent based on their track record and the ability to make their selling process low stress and hassle-free. Price is a secondary consideration that can be agreed upon.
Our main focus, therefore, was to build a robust customer service experience.
To achieve this, we had to look at our entire business process. From start to finish. From answering the phone to signing a contract we always ask ourselves: What could make this easier for our customers? Is there a better way?
Adopting this approach is important as we haven’t made any assumptions. We have just laid out business problems and come out with effective scalable solutions. As a consequence, we have evolved our existing business processes and then tailored systems around these to deliver our objectives of efficiency and clarity.
Customers usually call or us, email us or contact us via Right Move. We must capture that information and respond to it in a timely fashion.
Customers are usually interested in either getting their property listed getting a valuation or they want to view a property that they have seen online.
Customers are impatient and want to get an instant response where possible. This is paramount in securing new business. Would you list your house with an agent who took ages to get back to you?
Our rapid communication model means that we can get back to them in a timely fashion with the relevant information. Different customers want to be communicated to differently, some customers prefer to be called some customers prefer to be emailed.
Marketing A Property
Showcasing a property, the right way is vital. Photographs can make or break a listing online. A lot of people searching for properties online may not know the local area, so the only connection the person will have with the property is the photos.
Very few people will walk the area or do deep research before they go and visit unless they're traveling from a distance, so the presentation of the property is vital.
Using professional cameras with proper wide-angle lenses makes a huge difference. As does taking multiple shots and editing them afterward. The property listing should capture the audience's imagination. Just like a good synopsis for a book or a movie trailer it should draw the audience in.
What three key benefits does this property have? Or unique selling points. I.e. if this were a family home in a town. Near a good school, Large family home with scope for improvement and parking for 2 cars.
These may be obvious to the seller, but it is important to state them none the less.
You will be surprised by the number of estate agents that do not take the time to produce a good online listing following these basic rules.
Some don't use professional equipment to take photographs this has huge that cannot be understated and the property may not get viewings that it deserves and therefore it may not get the offer is that it deserves.
The second important thing is the price. The Psychology of price and price potential in any market is a powerful thing. Buyers can be instantly turned off or on by this one factor.
Pricing a property or asking the question what is my home worth? is a difficult question. A lot of people are emotionally attached to their property (family home, children, and memories).
A property sale is simply a financial transaction that is taking place between two people. price is very important and some people overvalue their property because of their emotional attachment or they feel it has a certain intrinsic value.
The property must be priced correctly in the market to achieve the best possible price.
Know Your Target Market
There are several ways to price a property and employ an effective strategy to go with. This all depends on the type of property being sold and therefore the typical person buying and their psychology.
For example, if we take a dilapidated property that needs a significant amount of work, we would be attracting a first-time buyer or a property developer or a landlord investor.
In this case, this type of property would benefit from almost an auction-style system where each person interested submit the highest bid and the situation and the seller can choose from that.
Conversely, if you have a family home that's all up together and near a good school, the chances are there will be a family wanting to move into that property.
This property deserves a completely different type of strategy, in this case, you may put a guide price on and see what type of buyers are offering and what their positions they are in.
It is highly likely those buying this will be selling an existing property. The devil is in the detail of the chain that lies beneath that sale. Also, how attractive is their property and can they afford to sell for a reasonable price?
A final example would be a property that is suitable for retired people a bungalow that has been recently refurbished. In this case, there may be a lot of straight cash purchases or one sale with a low or no mortgage.
Perhaps for people who are downsizing again, a different strategy may be employed to see who can offer on this property a lot of the people offering won't have any mortgage or maybe buy in cash.
The price you put a property on is affected by the psychology of the buyer and the type of price i.e. a guide price offers over auction style) in all ways and strategies of achieving the best sale price for the seller is very important to consider before you price the property and she just has to ask the question who is buying this property? who is the target market? This is vital.
If a property is grossly overpriced from its market value let's take an example of a four-bedroom house in an area where the average price is 350,000 and someone wants to market the property at 450,000 because it has a nice bathroom and kitchen most owners will be put off by this price comparison. The chances are they will look at the cheaper properties this property will get very few viewings.
The property may then suffer from very low offers putting on it against the price having a more realistic price for this property.
A better pricing strategy would be to put offers over 380,000 because as an added value is a much smarter strategy this will encourage more people to view the property see its benefits and features and then be able to make an appropriate offer based on what they have seen.
It is very difficult to convey a property's presence or value through an advert, in short, it's important to get as many people through the door to put down sensible offers so that you can pick and choose.
State the Obvious
Some buyers may not come from the local area and they may be moving down.
From Capital to Coast is one we see quite often. Therefore, it is very important to sell the benefits of the local area.
Is there a good school nearby? How is it rated? What transport facilities and amenities are nearby? These are all driving factors that justify the sale price of a house that may be obvious to local buyers but not to people from outside. These considerations will also determine whether they come to view the property or shortlist it. Assumptions are dangerous. So, spell out the obvious!
when it comes to selling your property and marketing your property don't seem that the buyer has local knowledge.
Qualify Your Purchaser and Their Offer
Getting the property under the offer is just the first step. A lot of things can change in the time between a sale being agreed upon and completion. Never assume the sincerity of the buyer or that they are honest.
Have they provided proof of that mortgage agreed in principle? Did they show the cash for that purchase? Have they viewed other properties but didn't get them?
All these details must be woven and delicately balanced to protect the genuine buyer but to have a healthy suspicion for all offers. We see all the time people that say they have a mortgage agreed in principle or their house is sold only to find this isn't the case. In the meantime, driving off other genuine buyers.
Can we demonstrate that they have currently marketed or have an offer on their property which is for sale? This is where a genuine cash buyer with no chain had a great advantage in the market because they can complete the chain quite easily. Often, they will be able to bid at a lower price and this may be reflected throughout the chain.
it is important to balance the sale price with the ease of sale this then puts the vendor is in a strong position for their purchase.
The Dark Art of Sales Progression
Sales progression is a dark art and involves the estate agent moving between various solicitors and trying to get an accurate and up-to-date picture of what has happened and how close the property is to exchanging and completing.
We have found that we are building up a chain and a regular flow of business with an estate agent that we can then rely on the same person dealing with that convincing and communicating correctly between the estate agent and the vendor.
Communication is paramount as miscommunication down the chain can lead to people pulling out finding out the property and breaking the chain that is in place it is therefore imperative that every week the chain is progressed information is passed correctly and more importantly both lenders and solicitors are chased if they are not or have outstanding tasks that are causing the chain to not complete.
Furthermore, if there are changes in the chain, in other words, someone’s mortgage has changed or property has fallen through this must be also communicated as this can be repaired all the circumstances can change i.e. someone sale falls through but then they find another buyer who is actually in a stronger position.
This is why sales progression is almost half the battle of getting a property sold and completed and thus the estate agent getting the completion commission.
Okay so when our exchange and completion date will the battle is not over yet now we have to make sure again we have clear communication and that the transaction goes through smoothly what time will the completion take place are we using standard times where are the keys he’s going to get the keys what about removals well if people agree to vacate the property were there any special things that were supposed to be left have been agreed on the T2 forms these are all questions that need to be asked and answered before the completion date.
The last thing you want to do is let your customer down at the last minute and ruin good customer service and leave a bad lasting impression so you must make sure that you make contact with the vendor is on the day of completion and everything has taken place smoothly if it’s not going according to plan again make sure communication is flowing between the buyer and seller and the solicitors so that everyone is kept up-to-date this should reduce the stress of the completion day and keep everybody happy.
At Your Key Move, we do a lot of sales progression behind-the-scenes to make sure that everything is running smoothly, and that the information has been communicated to the correct parties.
Giving the bulk of the fees to a solicitor on completion is often the best way forward as there is a direct incentive to getting the property exchanged and completed. Sales channels for an Estate Agent are paramount.
Visibility Is Key
Recent customers may recommend us to their friends or family based on their experience this is really important word-of-mouth can have a big impact on our reputation and therefore our long term success.
Visibility is also vital. From for sale or sold boards these can be seen on main roads their design and appeal are important.
Search Engine Optimisation and online presence are vital so that new customers can discover your services and excellent reputation through keywords. Finally using social media to promote new property listings or providing useful tips gains you a local, collective audience. This all helps towards brand awareness from potential customers.
Review Your Self and Build Trust
Online reviews are an important tool to gain the trust of new customers and to demonstrate your experience.
We focus on Google reviews and Trust Pilot, and these are both important for recording customer service experience. People may consider the rating important as part of the decision-making of which estate agent they should go with.
First Impressions Count. So true in our industry. The first golden "five minutes" with a customer can have a lasting impact.
They will make their decisions based on the type of experience are having from the offset. It is therefore imperative that we pick up the phone promptly and answer it in a timely fashion and a professional manner.
Some customers will list their property because they are in “established in the area." They assume they can’t go far wrong with that agent and all of their customers are satisfied.
However, logically they don’t consider the track record of the agent and how effective they are at selling properties. Do they underprice or overprice them? What type of service could they expect? How rigid are they on their fees? What is the average time to offer?
These are all important questions that simply don't get asked most of the time. Again some people are emotionally driven and don't consider the facts when comparing and contrasting agents.
In theory, the customer should choose all of the above when deciding which agent to use however people are logical, they don’t always decide on the best.
Coming back full circle. Re-enforcing our 5-star rating and excellent reviews on trust pilot does help cement some of these ideas into a prospective customer. Would you eat in a restaurant that had terrible reviews?
We have found for customers that have looked this has a big impact on who they choose to list the property with.
Sometimes it’s best to Walk Away
Some customers have had the property on and off the market dozens of times and I’m very indecisive about whether they want to sell the price which they prepared to sell. These vendors are generally best avoided. They consume a lot of time and resources and often don't yield good results. Time is a precious resource.
As an estate agent, it is important to be firm and fair with your customers and that you stick to your guns and your structure there is no real purpose in overpricing property opening a property on the people don’t want to sell this will just waste everyone’s time and causes a lot of confusion and frustration.
Be transparent with your customers. Do not try to inflate their or their properties' ego. Always aim to under-promise and over-deliver. Set realistic expectations on price and deliver effective marketing. The sale will follow.
It is better to refuse to list a property at an unrealistic price than market it at all. Make sure you re-enforce that marketing the property a high price, won’t generate any interest.
As an agent, we can see how many people have viewed a particular property online. How many clicks throughs did it get and more importantly, how many viewings has it had?
Properties that are correctly priced and are correctly marketed will sell usually within 2 to 3 weeks in a buoyant market. If the property is bespoke or the market is slow it may take longer.
Most properties that are on the market for over 12 weeks are either poorly priced or poorly marketed or both. This will just lead to more problems for that property in the future.
Again this comes back to what I was referring to earlier, who is the target audience who will be buying this house? what features are they looking for? If you’ve got retired people they may want to live in a quiet cul-de-sac it may be worth reinforcing level walking towards shops if you have a family who has children you would want to reinforce the good schooling in that area and other facilities that may be of use to that family. Always sell and re-enforce the key benefits to that target market.
This is all an important part of marketing and selling the property to owners there is no point just listing the property with a price without describing the benefits of the area.
Remember it is very hard for non-local customers to appreciate a property with an excellent location without actually visiting it.
Yes, there are things like Google Maps or 3-D walks that you can do but it’s very difficult to appreciate the actual situation of property without knowing the local area and have been there. Therefore we must get lots of people through the door this means the property should always be attractively priced whether that she’s in the guide price or referring to the lower end of the price this will encourage more people to visit the property and therefore should generate more offers this then allows the seller to choose from those offers.
And the offer isn’t just the amount that someone is offering it they’re buying position do they have anything to sell so they have a mortgage agreed in principle these are all important factors that will feature for the person selling what is the person selling doing are they moving or are they just selling an investment property again these are all important factors that will determine which buyer they choose to go with.
Offering a higher price and the property will get the attention of the person selling it and they may well choose you however if you are in a long complicated chain and the sale could take the time or may fall through they may well choose a lower offer from a buyer who is in a stronger position, in other words, they don’t have anything to sell or have cash and or have a mortgage agreed in principle.
Reinforcing the Chain
It’s critical that we check the information has been given to us by those buyers it will be very easy for someone to say I have a mortgage agreed in principle I have someone who is already lined up to buy my property these would make that buyer more attractive and allow them to offer a lower price however all of these facts have got to be qualified.
A good estate agent and a good solicitor will check these facts and make sure that they are correct as they affect the state of the purchase there is no point taking the property off the market only to find the person buying it has a long chain hasn’t sold their property these facts need to be established quickly so the property can be taken off the market and the necessary process put in place also the second point is that you must never discount those that didn’t offer enough came second or third one bidding for a property because circumstances can change very quickly.
People can change their minds finances can change facts can change therefore it’s important that those people that bit lower amounts or had slightly more complicated chain are invited back and not kept up-to-date as they may want to still buy that property.
Our Neck of The Woods
Folkestone, Hythe, and the surrounding areas are a lovely place to live, there is a lot of history and you are close to the sea. Property prices are still sensible, despite having risen sharply and some areas still offer great value for money in comparison with London.
We are now dealing with a lot of people are moving down from London who can take advantage of the high-speed train link and are now able to work from home.
Folkestone is a great family place it has good schools nice beaches and good surrounding areas for activities for families therefore it’s not surprising that we find a lot of younger families are moving down to the area to take advantage of the green space and beaches.
All this demand has caused property prices to rise very significantly, especially larger properties on premium roads that are near to the sea or the station.
I would imagine that in about 10 years’ time Folkestone, Sandgate highs those surrounding areas will move towards the type of prices that you could see in pool or Bournemouth in Dorset and particular special areas may even move towards sandbank type prices.
There is still a great opportunity to buy properties at a good value in the right areas of Folkestone and there are certainly opportunities to buy larger properties and improve them towards the coast as there is a high population of elderly people there is also a lot of opportunity for probate sales where properties could be improved and result for profit.
There is a great demand for flats and bungalows for retired people who want to move down and downsize. People from the capital now want to have clean simple living by the sea.
As the medium price of property increases in the area so does the potential profit margin as the fees the estate agent charge is between say half a percent and 1.5% depending on the type of property the value they will make will increase as the prices increase.
Easily outstrip inflation what this means is the expectations of those customers will also rise when dealing with a property at £1 million-plus the expectations of those customers have a far higher than the property marketed at say 500,000.
The Devil is in the detail
The larger higher-end estate agents which are online won’t benefit from the local knowledge and equally local agents that charge higher fees may deter those people from selling their property this is where a local online agent with local knowledge has a massive benefit.
This brings me onto business processes and e-commerce it is vital that this agent has an effective online website and also effective business processes to deal with all the aspects of buying and selling a property.
For example, anti-money laundering checks which are a requirement by law can all be done digitally and easily through third-party website customers details can be securely stored and checked and the customers can be verified before the properties go to market.
There was also a great opportunity for ancillary revenue when selling property things like EPC is energy performance certificates can be booked online again using a third-party.
Extra value things like 3-D floorplans or premium listings or featured properties can also be sold along with things like viewing packs.
Solicitors referrals also a great way of generating ancillary revenue and also add the benefits of having solicitors that you know and trust dealing with the purchase and sale respectively.
A Customers Journey
Let me talk you through a customer’s journey and the key steps of selling their property number one customer will contact us by the website or phone call and they would want to book a valuation.
Number to the agent will make contact with the customer and arrange an appropriate time to visit them at the property during this visit they will appraise the property and give the owner an idea of the valuation and also highlight the key benefits our business can bring into selling their property.
It’s very important the agent emphasises our track record of customer service and demonstrates our philosophy when dealing with them. We can get the property sold for a reasonable price and still deliver great service.
You would think the commission price would be paramount in closing lease deals it really isn’t yes the customer wants to get reasonable value but more importantly they want to trust the person involved in being able to sell the house effectively with the minimal hassle that’s the key part gaining the customers' trust without gaining the customers trust you will never be able to list and sell the property.
Therefore, don’t slate the competition or say how poor other people are. We simply focus on how good we are what we provide and we let ourselves shine amongst the competition other agents that resort to these types of tactics often look desperate and very poor themselves.
The customer has to sign a contract we digitally produce these contracts using third-party software. This lays out the terms and conditions and it also saves time and money because its digital. Once signed, the property can be listed what’s important here is to choose the right weather conditions sunlight I’m on portly use excellent photographic equipment.
You would be surprised the number of listings that I see on Rightmove that have been taken using poor photographic equipment with the wrong type of lens, for example, someone has used a smartphone to take photographs of the property this is a very unprofessional and poor practice we use proper photographic equipment with the correct type of wide-angle lens to do the property justice and to make sure prospective customers can get a feel for the place without having visitors.
Having a decent floor plan for the property is essential as is having an accurate description which highlights the key benefits of the property and encourages someone to want to view them, therefore, writing this description is imperative.
We believe the customer is always right and that’s why the customer is always the person to authorise the advert we should have a draft preview of the advert and make sure they are happy with the contents before it goes live, after all, it’s their property and we want to make sure they are comfortable with how it’s been marketed and sold.
Once the property is live, we will relay any interest for viewings to that customer and arrange for viewings to take place.
Once the viewings have taken place, we make sure both positive and negative feedback is given back to the customer so they are aware of what people think of the property and to help guide realistic price expectations.
We try to interact with our customers every week and provide an interactive marketing report to say how many people have looked at the property online and what interest it’s getting.
All of this information feeds back into a loop to see if the property should be marketed differently. Should the price be adjusted? Could anything be changed to attract more people?
The Price Is Right
I think the property should be priced correctly from day one I think adjusting the price afterward can have an adverse effect.
It is more effective to use a lower-end guide price, to begin with that certainly would be my preference for marketing or selling any property that I own.
When a property has its price changed frequently and has relisted on multiple agents it smells of desperation and sends out confusing messages. This intern will encourage people to put in low offers and they won’t take the sellers seriously.
even if a property has had very little interest if you can make the buyer feel they are lucky to be viewing the property and it has had a lot of interest and sensibly priced this will help achieve sensible offers for the property.
Conversely, a property that has been grossly overpriced i.e. sold for offers of 500,000 when it’s only worth 400,000 not only will the property not get much interest but those viewing it will probably actually end up offering even lower amounts and when you show that type of discrepancy in the price it makes the buyer wonder why the property has been priced so poorly in the first place.
In this case, it will be much more sense sensible for the buyer to put the property on a Guide price of two 425,000 this will encourage people with a budget of 400,000 to look at the property and maybe those with a higher budget also to look at the property and make offers.
Hopefully, this article is giving you some insight into the type of things that we need to do in running an estate agent on a day-to-day basis and the type of philosophies that must be employed to ensure you have great customer service.
Also, you can see the work that goes into the listing, marketing, selling, and completing on a property.
To build a successful estate agent, you need to gain a customer’s trust. Make sure your business is both efficient and friendly. Deliver the service and grow your reputation.
Lenders are reported to have struggled to deal with a flood of applications from first-time buyers. If buyers are unable to climb on to the housing ladder, or even move up with their next purchase, this could reduce demand and exacerbate any fall in prices.
Most banks have stopped deals with a 10% deposit, the industry fears a sharp fall in house prices and now HSBC is the only high street bank offering mortgages with a loan-to-value ratio above 90%. These deals are limited in number each day, and certainly from our experience are incredibly difficult to acquire. It may be recommended that the client attempts to go direct to HSBC to try themselves.
Why are Banks increasing the deposits buyers need?
Banks are withdrawing lower deposits due to fears they will lose money on mortgages if prices plummet and repossessions do not cover the money lent. They are basically asking customers to put more ‘skin in the game’ to mitigate their exposure to loss.
What is availability of products?
Banks are now squeezing out borrowers who can stump up only a 15% deposit for a home, data shows. The number of mortgage deals available to borrowers with a 15% deposit has almost halved from 664 to 357 since March, according to analyst Moneyfacts.
Even deals requiring a deposit of 20% have fallen from 714 to 571. The crunch comes amid fears of a house price crash, which could limit the money banks can recoup if they need to repossess homes.
TSB has become the first big lender to axe their deals on all home purchase, remortgage and shared ownership products with a loan-to-value ratio of 85%.
What about House Prices?
Nationwide Building Society has predicted house prices could fall by 14% in 2020. Currently we have not seen a big drop in prices due to the limited supply of properties which seems to be propping up the prices at the moment.
Two-year average mortgage rates have fallen to new lows, as choice at higher loan to values (LTV) remains limited. Rates now stand at 1.97% on a typical two-year fix, analysis by Moneyfacts. It is the lowest level in a year and compares to 2.49% in June 2019. The fall in rates is largely because the number of higher Loan to Value (LTV) products has fallen dramatically since the UK went into lockdown.
The higher LTV rates are usually higher, so without them the average has naturally decreased. Lenders that have been offering higher LTV mortgages in recent weeks have found they have been overwhelmed with demand. They have even limited availability to customers and brokers alike to makes sure they are not overwhelmed.
Hopefully more lenders will be able to re-enter the higher LTV area making more options available to borrowers. However, this will mean the average rate will begin to increase again. If you are in a position to look at your mortgage options, now would be a great time.
The number of additional mortgage products coming to the more market in June has flat lined. Product availability plunged by 2,656 between March and May as the UK and property market was in lockdown, according to Moneyfacts.co.uk. Between May and the beginning of June lenders started to widen choice by adding 244 deals to the market. However, this trend has not continued during the rest of June. Lenders have been particularly cautious around reintroducing higher LTV mortgages.
This is particularly disappointing to first time buyers who are already suffering from low savings rates and now extremely limited higher LTV mortgage products. There is huge demand for these type of mortgages, although lenders have an appetite to lend, keeping the mortgage market moving, the demand has been too much for them and caused most to take a step back to take stock of what the future may look like.
Many households have suffered over the last few months with reduced income, lack of job security and general upheaval. Soon we will see the first batch of mortgage holidays come to an end and potentially an injection of customers wanting to assess to current mortgage world.
One of the most obvious changes we have seen from mortgage lenders is the restrictions on applicants’ income and affordability.
Many employees rely on elements of income other than their basic salary, such as commissions and overtime. Lenders will use varying % amounts of additional income an employee receives from 100% to 0%, this can have a major impact on an applicants’ total loan available.
Since the Coronavirus outbreak we have seen lenders significantly adjust their criteria around affordability in general. The most significant challenge is proving to be when an applicant has been ‘Furloughed’, if you are furloughed by your employer, it means you're being sent home, but will still receive 80% of your salary by the Government, up to a maximum of £2,500 a month. Most major banks will still lend to workers on furlough, but many are assessing lending on a case-by-case basis. Many lenders will now only accept an employees’ furlough pay rather than their normal salary amount. Some lenders have now started asking new customers on furlough to provide letters from their employers confirming they will indeed be brought back to work.
Case by Case Basis
The term ‘Case-by-Case Basis’ is one that is becoming synonymous with mortgage applications. It means that the lender will review each individual application on it’s own merits. This is particularly important when an applicant has income made up from commissions and overtime as well as basic salary. Basically, lenders are looking at the industry you work in and deciding how your industry will be affected by the impacts of coronavirus.
An example would be a car salesman whos’ commission makes up 70% of earned income. One lender will not take the commissions earned at all, another will take 65% of the commission amount and another will not take any of the commission if the applicant has been furloughed. It is safe to say that there is no one size fits all.
Further pain is dealt out to those applying, as the time taken for the lenders to assess cases has increased significantly, making the applicants sweat before a decision is made.
This will leave a huge number of employees (who have been furloughed or not) in a state of flux. Knowing what the right thing to do is difficult to say the least, and will often require us to discuss a case with a number of lenders before we are able to recommend the best solution before going forward.
Mortgage lenders have made significant changes to the availability of their mortgage products, some lenders are even going as far as to stop any new mortgage lending.
This is not limited to the smaller banks and building societies but has been across the entire spectrum including major high street banks.
Why are they doing this?
There are a couple of major reasons why lenders are doing this. Coronavirus has hit the workforce hard, with restrictions on employees affecting the Banks and Building Societies in the same way as everyone else. Basically, the levels of business a lender has the ability to deal with is reduced. Their response has been to remove products, thus reducing the incoming business. This has left lots of people without any product options.
The second major point is that physical mortgage valuations have not been possible due to the government guidelines. Some lenders do carry out desktop or drive by valuations but not all.
What does this mean for existing borrowers?
If you’re on a variable rate or tracker product you may not see any change in your monthly payments or interest rate as this is happening so fast the lenders are being very slow to pass the reduced interest rates down the line, this may be due to the significant impact coronavirus has had on their workforce. Some lenders however have addressed this issue by committing to passing on the full reduction to those entitled to it. Other lenders are delaying any change to those product rates, this would suggest they believe the Bank of England see the base rate reduction as a short term measure.
What about new mortgages borrowers?
You could be forgiven for assuming that the reduction in base rate will have an immediate impact on the rates available to mortgage borrowers, but this has not been the case so far. Most lenders have not reduced their rates at all with many withdrawing higher loan to value product ranges entirely, it looks like the risk of higher loan to value mortgages is too much for most lenders at the moment.
Some of the more niche lenders such as Together Money and Vida Home loans are simply not able to obtain money to lend themselves at the moment. They use the wholesale and capital markets which themselves are closed currently. This means these types of lenders are only able to work on existing mortgage applications and are unable to accept new ones.
Is getting a mortgage possible?
Lenders who have made changes have also made it clear that they are expecting these to be temporary due to the coronavirus situation, and are hoping to return to normality when possible.
When money is available to lend and surveyors are able to physically value a property the lenders are likely to revert back to their pre lockdown criteria and product ranges.
What can I do in the meantime?
The main thing to remember is that lenders want to lend money, it’s what they do. The measures they are taking at the moment are in response to the current situation. It is still possible to submit applications and more lenders are opening up higher loan to value products each week.
The main thing you can do is prepare yourself for the mortgage process, get in touch with a broker who can start researching for you, discussing your options and get an understanding of your situation. Check your credit report and make sure you're in the best position possible when the dust settles.
Valuations is the big question. Lots of lenders have been innovating in the last few weeks to try and navigate this hurdle. AVMs & Desktop Valuations have been widely introduced to try and accurately value properties for mortgage purposes.
Furlough & Mortgages
With so many employees being put on furlough mortgage lenders have been updated their criteria and factor this into their affordability calculations. The fact that lenders are still considering applications from furloughed employees is good news, however most lenders are now using the furloughed pay amount at 80% of your normal salary, even if it is being topped up by your employer.
Mortgage Product Availability Drops
The amount of mortgage products available in April (although still in excess of 10,000) was significantly lower than the running average before. Products are beginning to become available again but this will take time to get back to the previous ‘normal’ levels.
What are AVM’s?
AVMs are Automated Valuation Models, computer programs designed to value properties. They use historic sales data in order to calculate an estimate for the value of the property in question. It is as a result of AVM’s that more lenders have been able to increase the loan to values available and indeed start to lend at all.
Lot’s of lenders are now offering up to 85% loan to value with a few offering 90%, this new technology is helping the mortgage market recover sooner.
What does this all really mean?
There are lots of positives to take from the way lenders are reacting to the changes in the world. The way the lenders have adapted, and how quickly, to the changing world has been excellent, many completely changing their processes to boot. It will undoubtedly contribute to a smoother process going forward, leading to both faster processing and potentially increased capacity.
It seems likely that lenders will be looking to reintroduce higher loan to value products when they feel ready. Hopefully this will be sooner rather than later and give clients more options.
Where are we now?
Physical valuations are now possible, subject to the owner and surveyor being satisfied it is safe to do so. This means that lots of lenders have been able to get surveyors back out to properties again.
As the lockdown continues, the availability of mortgages with smaller deposits of 5% & 10% have remained very low. There are in fact less than 20 products available at 5% in total, with most lenders still offering 85% as the highest loan to value.
The biggest impact of the continuing shortage of funding is on higher-risk borrowers, including first-time buyers. They are likely to continue to find it more difficult and expensive to get mortgages while current conditions persist.
What has this meant for new mortgage products?
More products are coming back to the market and becoming available again, we are nowhere near to the levels two - three months ago but availability is on the increase.
It is worth noting that although the loan to values are becoming more available, although still incredibly limited, lots of the lenders have tightened their criteria and background income multiples. This means that you may not be able to borrow the same amount as you could in pre lockdown times.
The surveyors valuing properties for the mortgage lenders are also in a bit of a sticky situation. As they usually use comparable properties that have sold recently in order to effectively appraise a property they are at a disadvantage as there really hasn’t been any property completions. In this situation it would not be unsurprising if the surveyors are cautious when valuing for the foreseeable future.
Despite all the doom and gloom surrounding us moment, we need to remain positive. There will be light at the end of the tunnel and life has to go on. For many businesses and industries, there is an element of the unknown, but this will pass. Some may say that starting a business in early 2020 is not ideal. However, there is one local chap who is hoping to buck the trend and started his own estate agency business. Having worked in both Cooperate ad independent environments, Jonathan Mapp, who has over 14 years experience in the local area, has seen a real change in the industry especially over the last few years. He has experienced both good times, and bad, but strongly believes that the estate agency industry is strong and overall the market pretty good. He feels he is able to offer a new, enthusiastic and fresh approach to estate agency and with interest rates for mortgages being so low, he believes that now is the perfect time for people to buy and sell property, even with the unknown of the coronavirus. Jonathan is hopefully able to help vendors offering low estate agency fees, No VAT! While still being able to provide the personal attributes the industry demands.
Jonathan covers Hythe, Folkestone, Romney Marsh, Ashford and all surrounding areas. He works closely with solicitors, mortgage advisors, and all parties to ensure a smooth and prompt progression of sale.
Being independently owned, he can offer the flexibility to work with all customer requirements giving a professional, personalized service tailored for you. For Jonathan, customer service is one of the most important aspects of the property industry. He is confident that when it comes to selling your home, he has it just right. His work ethos is to treat all clients as he would want to be treated himself, and truly prides himself on impeccable customer service. He is passionate about his work and will be with you every step of your journey, from start all the way to the handing over of keys on completion.
Mapps Estates ‘will go the extra mile’.
Mapps Estates, ‘The Route To Your Perfect Move!’
Call Jonathan on 01303 232637 to discuss any aspect of the moving process. He will be delighted to help.
Equity release - home reversion
What is Home Reversion?
A Home Reversion Mortgage is when you sell part or all of your home to a Home Reversion provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die, rent free, but you have to maintain and insure it. You can ring-fence a percentage of your property for later use, possibly for inheritance. The percentage you retain will always remain the same regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold and the sale proceeds are shared according to the remaining proportions of ownership.
When considering a home reversion plan, and if it is the right product for you there are a number of things to think about.
Whether or not you can release equity in several payments or in one lump sum.
The minimum age at which you can take out a home reversion plan. Some home reversion providers insist you’re at least 60 or 65 before you can apply.
The percentage of the market value you will receive. This will increase the older you are when you take out the plan but might vary from provider to provider.
You have the right to remain in your property for life or until you need to move to long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract. (Equity Release Council standard).
You have the right to move to another property subject to the new property being acceptable to your product provider as continuing security for your equity release loan (Equity Release Council standard).
The product has a “no negative equity guarantee”. This means when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more (Equity Release Council standard).
What level of maintenance you’ll be expected to carry out and how often your property will be inspected (this could be every few years.)
If you would like to discuss Home Reversion Plans or Equity Release in general please don’t hesitate to call us on 01303 721117 or submit a contact form www.ptmortgagesltd.co.uk