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Mortgage and Rental Market During Covid-19 Q&A

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During a recent webinar as part of the SevenQuestions Series, SevenCapital Director, Andy Foote, hosted a live Q&A to answer questions from real investors on the current state of the UK property market. Below we share with you his views on the possibility of getting a mortgage during Covid-19, and how the virus will affect rental demand in the UK in both the short and long term.

Can I get a mortgage now during the Covid-19 crisis and will there be down valuations?


Andy Foote’s transcripted answer:

Well, the answer is yes and yes in some places. I’ve been speaking to a representative at Visionary Finance who’s one of the main mortgage brokers in the UK, and he’s been telling me that he’s talking to lenders and they can’t wait to get back into the market – which I found surprising.

The reduction in bank base rate from 1.75% to 0.1% has led to higher profit for the banks as they’ll keep their mortgage interest rates at the same rate, which could be 3.5% for the buy-to-let market. With a lower base rate they’ll be making extra money, and so the information from Visionary is they’re looking forward to getting back into the market and offering mortgages. 

As far as down valuations are concerned, for the past two or three years we’ve seen the mortgage market contract, because the lenders have been advised by economists that the global economy is ageing which has nothing to do with Covid-19. The Trump-China trade war and further examples like this have been putting pressure on valuations over the past couple of years.

To give you an example, last year at SevenCapital we delivered over 1,200 apartments and 950 or so of those had mortgages, half of those were overseas and we managed to get them all through to completion. Like anywhere in the world, it’ll be challenging in some places to get a mortgage and there will be some down valuations but we managed to get everybody to complete and expect to continue to be able to do so.

How has Covid-19 affected the rental market?

Andy Foote’s transcripted answer:

The world is changing and it’s been changing for the last four or five years. They call it ‘generation rent‘ in the UK because people are migrating to the cities from all around the world and they want to work and play in the cities. The retail high street is diminishing and it’s becoming populated with bars, restaurants and offices. We’re seeing this all over the world and it’s unlikely to change.

There’s a huge demand for rents in the UK now. Before it was 80% houses 20% apartments, that’s changing right now as we see a transition going on in the UK, they’re building more apartments than houses. We’re copying neighbours in Europe like Germany, France and Spain who already have 80% apartments and 20% houses so this generation rent is only on the up. 

Our fathers told us when we were young ‘don’t rent its dead money‘ but that has completely changed, now people can’t afford the deposits and the mortgages so they’re happy to rent. 

We’ve got six letting agents on our panel at SevenCapital and they have all told me that they’ve been letting all the way through these last seven weeks. They’re down to 50% but if they were doing 20 a week, they’re now doing 10 a week. The one thing they’ve all told me is that they’re building up a big backlog for when the restrictions are lifted.

So to answer the question how has it been affected – well there’s a temporary lull but there’s a huge backlog coming and it’s sustainable for the future.

 

Use the hashtag #SevenQuestions to ask your questions and lookout for the next webinar in the event section of our blog.

For more guidance and further advice for landlords, tenants and local authorities more broadly about their rights and responsibilities during the COVID-19 outbreak please see the link below.

https://www.gov.uk/government/publications/covid-19-and-renting-guidance-for-landlords-tenants-and-local-authorities

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