Lockdown Liquidity – Let’s Get Real
It’s Monday again, that’s a whole 6 weeks of lockdown if you’ve been counting (I have).
Day 42 is certainly starting to take its toll on all of us, but at The Buy to Let Broker, we’re healthy, coping (mainly), keeping positive and still doing business.
I’ve spoken to a lot of landlords over the past few weeks, and in general, the impact has certainly been felt, but anecdotal feedback is that the majority of tenants are able and happy to pay their rents which is keeping landlords’ prospects buoyant, for now at least. HMOs have and Holiday Lets have been hit somewhat harder, of course these will remain an issue for a little while longer.
We’re hoping for the right indicators this week to allow some good news on Thursday, let’s hope this really is the ‘end of the beginning’.
We have been blown away by the lengths that our landlords and their tenants have been taking to collaborate during this time. We have seen countless random acts of kindness from many of our landlords and it makes us even prouder to support the good work that our clients do.
The big question that we are all thinking about right now; is there light at the end of this Covid-19 tunnel for landlords?
Well yes, and there’s plenty of light already, but we have to get ourselves and our tenants safely back to work to hold back the bigger underlying pressures that are ready to pounce if we don’t.
We are seeing major improvements in the mortgage market within this lockdown state, mainly for single let properties and up to 4 sharers admittedly. Lenders have now bounced back from the hundreds of thousands of phone calls requesting payment holidays, have now settled into new working arrangements and are embracing tech-based valuations, terms, LTV and criteria as a result.
The data is in, and it seems around 10% of all mortgages out there are now on payment holidays. I have to be honest if I’d have taken a stab in the dark, I’d have guessed higher myself, so this is certainly encouraging, but still a scary figure when all is said and done.
Are lenders asking us some awkward and searching underwriting questions at times? – Yes. Are the lists of requirements getting longer? Yes, some are war and peace. But it’s a tough market to trade in – so this was always to be expected and as a business, we are happy to fight the good fight to secure funding at a time when many landlords need it the most.
Are we receiving plenty of Mortgage Offers? We are. And although completion numbers are around 35% down in April versus a monthly average over the last 12 months, given that purchase transactions have fallen off the edge of the proverbial cliff (for now at least), our figures actually show that the industry is holding fast and carrying on. One reason for this is that we are seeing many auto-valuations coming back at the estimated level (AVMs – that’s an algorithm based valuation where no surveyor is required).
We had an incredible start to May, with 33 completions on Friday just gone.
All of this means, we are definitely seeing the pressure being lifted from where the market was a couple of weeks ago and there is more positivity flooding back as each day passes.
A few examples;
- We’re thrilled to see Kent Reliance and Precise are now back in the market. Lending to 60% LTV using AVMs.
- We’re very happy to see Paragon remain lending at 75% LTV using a desktop valuation model, their surveyors don’t leave their desks.
- BM Solutions last week increased their maximum LTV to 75%, again using AVMs where possible, which is very welcome news to us.
- Shawbrook is up to 75% LTV with AVMs assisting with Ltd Company SPVs and Trading businesses.
- Coventry has increased its Godiva range of BTLs back to 75% too in the last few days.
- TMW is sitting at 75%, and TML has launched back to 75% LTV too.
New lenders now accepting AVMs;
- Skipton, Stafford Railway, Darlington, Leeds BS.
In actual fact, we now have 43 lenders allowing AVMs or automatic valuations, that’s one for each day of lockdown and another to spare.
I wouldn’t be surprised if most vanilla BTL lenders post lockdown, started to allow desktop and AVM valuations, which would be good news for landlords from a speed and cost perspective. It also might give lenders and conveyancing companies the futuristic kick that the market deserves, getting rid of backward outdated processes, we all have our fingers crossed on that one.
But we now desperately need to start to see higher LTVs heading back towards the market, the issue of non-bank lender valuations (where AVMs cannot currently work), for us be able to solve some more complicated funding issues for the type of properties that are our bread and butter in ‘normal times’ – Multi-Unit Freehold Blocks and larger HMOs. We need to get the purchase market back open and trading at full capacity rather than the low level at which it’s currently trading.
The Government are pushing to keep businesses moving, keep the funding and retain the liquidity. Where is that support for the landlord? Payment holidays don’t cut it since they can be damaging to landlords’ short term future. We now need to see surveyors allowed to get back out there, enabled to do their jobs in the first phase of lockdown release, with appropriate measures of protection obviously, but nonetheless it needs to happen to return our market to some kind of normal over time, and reduce the bottleneck of valuation appointments that are needed for many.
The major housebuilders have announced plans to re-open their construction sites from this week. And many bigger superstores are starting to open, which, from an economic perspective can only be a good thing. So let’s hope we can get to a position where this major leap forward can happen to keep the flow of funds for landlords in the areas where limitations persist, to support their tenants within these currently hampered areas of the market.
With the distant whispers of the UK’s lockdown being lifted, now starting to become a louder cry we will continue to offer our contactless advice for however long it takes and beyond. And please rest assured that the industry cries are getting louder each day.
There is certainly light at the end of the tunnel, but – since we don’t know how long the tunnel is, all we can do for now is keep heading towards it.
“We must embrace pain and burn it as fuel for our journey”.
I hope we take as many lessons as possible from this crisis and use it to all make our business plans as robust as possible for the future, and who knows, dare we start to look at the inevitable opportunities on the other side of all this?