Slowing property market and market consolidation discussed at Lenders Live



While the property market has slowed compared to last year’s figures during the stamp duty holiday period, “the market is far from quiet”, according to industry professionals.

Speaking on the latest Lenders Live panel on LinkedIn, which is hosted by Knowledge Bank, Santander head of business development manager for mortgages Graham Sellar says: “In the UK, we tend to sell 100,000 properties a month, which has been the general trend for the last 10 years. Through the stamp duty holiday period, some months did reach 200,000 but it’s dropped back to roughly 100,000, so the market is not quiet.”

Last week, the latest data from Propertymark revealed that the average number of viewings per property has fallen by 29% in June as the number of new buyers registering per member branch in June seems to have echoed levels seen in the winter months.

But Sellar explains: “There are still a lot of buyers wanting to buy but there is a lack of property for them. Prices are still high and when you look at the house price index, it’s still running at 12% from the year to May and even in the period from April to May it rose by 1.2%. House prices are still being forced upwards because of the demand and lack of stock, but it’s still a very very buoyant market.”

Landbay chief executive John Goodall adds: “If inflation stays high – and by high I don’t just mean 9% but 4% or 5% – interest rates will continue to move up. One of the reasons the housing market has been so buoyant is because it has been phenomenally cheap and cheaper than it’s ever been in history.”

“We are likely to enter a new norm where that is not the case to the same degree. It will still be cheap relative to historical standards but if mortgage rates are likely to be double what they were 18 months ago, which is likely to go on for a long time and that will certainly have an impact on sort of the pricing within the housing market because mortgage payments are going to be far more expensive than they have been,” Goodall adds. 

The panel notes that this has also impacted the buy-to-let market, and “could effectively wipe out thousands of pounds of landlords’ profits”. 

Hampshire Trust Bank’s Sedgewick says there has already been “a patter of feet leaving the market”.

“We have started to see a lot of landlords moving into houses of multiple occupancies (HMO) and larger HMOs, particularly around student accommodation as well as people into the holiday market.”

“For professional landlords that rely upon their rental income as part of their income will just diversify. We will see a slump of properties coming into the market that might well be deemed first-time buyer properties and will also start to see some properties coming back onto the market, but I don’t think you’ll see a mass exodus of landlords because I think what we would have seen has probably already gone.”

Prolific Mortgage Finance managing director Lea Karasavvas explains that with interest rates a lot higher than what they were “accidental landlords that came to market during let-to-buy when the cost of borrowing was so cheap are now looking at 4% of the sum instead of 1.75% and that is just going to diminish the profits”.

“This will make those accidental landlords question whether they want to keep those assets or whether they want to dispose of them now, especially when you look at the discount duty saving that could be made if you sell that property within that certain period.”

Karasavvas suggests a lot of the accidental landlords will “disappear”.

He also believes the market will see diversification as well, for example, “the tax benefits that come with going down the holiday let route will look a little bit more attractive”. 

“Rather than just getting rid of stock and holding, we will see a diversification which should actually keep the buy to let market pretty stable,” he explains.

“The pressure is now on the lenders to come up with something more innovative in terms of rates,” he adds. 

Market consolidation

Market consolidation was also discussed during the panel after the discussions to combine Habito and L&C came to an end on Friday. 

While Santander’s Stellar declined to comment on the deal, he explains there is “a bit of query in the marketplace” around whether there will be a shift of people moving into authorised representative (AR) or directly authorised (DA) as well as larger players looking for more individual brokers with the upcoming Consumer Duty rules.  

Sedgewick adds: “As we have seen with Starling and Kensington, we might start to see some of the large banks invest in some of the specialist lenders.”

However, she says “I wouldn’t like to point any fingers at any particular lenders, it’s just that the funding mechanisms are quite complex.”

Cost of living crisis

With interest rates likely to rise and the continuation of the cost-of-living crisis, more people will potentially be rejected by high street lenders due to affordability but will specialist lenders swoop in to take on the extra business?

Hampshire Trust Bank’s Sedgewick suggests that while specialist lenders will be able to pick up the shortfall on this, “they also work within the same parameters as high street lenders when it comes to stressing borrowers”.

 Sedgwick explains: “Where specialist lenders are probably slightly different is they may look at different types of income and they may include that when they’re doing income multipliers. But where the specialist lenders fall is 8% to 5% of everybody’s book needs to start less than four and a half times income and specialist lender are quite small by comparison to some of the mainstream lenders.”

“So, if only 15% of that lending can be at more than 4.5%, it doesn’t really give a great deal of wriggle room. While people are looking at the specialist market, and there will be some great offers available to consumers, I’m not entirely sure that that is the panacea going forward,” she adds.