Although we presently don’t know the full impact that Covid-19 will have on the UK economy and the consequential effect on the wider property market, it is for certain that we will enter into a period of recession.
Recent weeks have seen many lenders withdraw much of their product lines, or if not withdraw, then certainly modify their terms drastically. The last few weeks has seen Loan-to-Value (LTV) terms drop by up to 15-20%, as lenders make efforts to protect themselves and still keep in business.
The development finance sector has been hit especially hard, which may improve since the government issued guidance that does not prohibit construction activity as long as public safety guidelines are in place and being rigorously followed. However, many sites have remained closed amid concern for family safety which has had a huge impact on finances.
It isn’t easy for SMEs in construction anyway, and the future may prove that accessibility to development finance will be even more restricted and become a serious issue. The market is currently inconsistent, with many lenders toing and froing on if they want to lend finance which leaves borrowers unsure of who they can rely on. This will need to level out if confidence is to be gained by brokers and in turn, flow down to borrowers.
Affordability has also been affected by the pandemic which has put many jobs and incomes at risk, to which the full extent is not yet known although potential buyers will almost certainly have been financially affected by Covid-19 in some way. Property prices are expected to tumble further which will significantly affect the amount that lenders will risk lending.
Even if there are lenders who are willing to lend, there is still the issue of surveying. Although many surveyors are still working from home, there is the possibility to carry out surveys using desktop valuations and many lenders have stated that physical inspections may not be required on some products.
Brokers will need to prepare applications according to the criteria that they know the lender will accept and use surveyors who can deliver desktop valuations.
In much uncertainty, one things is for sure…lenders and brokers alike are going to need to grit their teeth and buckle up if they are to trade through the next 12 months.