COVID-19’s Impact on the UK’s Property Market

To hear about the COVID-19 pandemic’s impact on the UK’s property market, we caught up with Paresh Raja - the CEO at Market Financial Solutions (MFS). Founded in 2006, MFS has established itself as one of the UK’s foremost independent specialist finance providers, offering a range of fast and flexible bridging loan products, each individually tailored to meet the needs of private clients and commercial organisations. The firm also works closely with brokers to create bespoke loan solutions to overcome complex circumstances.

What impact did the first nationwide lockdown have on the property market and bridging sector in the UK?

The sudden spread of COVID-19 caught many sectors off guard. And the nationwide lockdown announced in March 2020 posed significant challenges for the property market – with strict social distancing measures in place, viewings and valuations became impossible and prospective buyers were discouraged from moving properties. Consequently, the market essentially came to a standstill.

During this time, those in the middle of a property transaction were suddenly in a precarious position. Banks were taking longer to deploy mortgages, not accepting new applications, or rapidly withdrawing products in the face of economic uncertainty. Thousands of homebuyers and property investors were at risk of their deal collapsing.

As a result, MFS experienced a surge in demand for bridging loans during the first lockdown as property buyers hoping to complete on transactions sought loans that could be deployed quickly. I’m proud to say our ability and willingness to take on these cases ensured these sales were completed without the buyer losing out on their property. If specialist finance was not available, I imagine we would have seen a much larger number of sales falling through.

On 13th May, Housing Secretary Robert Jenrick announced the property market was once again open for business, relaxing social distancing measures. How significant was this announcement in reigniting the property market?

The government’s “reopening” of the property market in May was essential. It meant people could once again move homes. On top of that, it meant that agents, lenders, removal firms, brokers and professional services firms – which are all totally reliant on property transactions taking place – could start to operate once again.

It was striking how quickly the wheels started turning again. Rightmove reported its busiest day on record on 27th May 2020, with more than six million visits to its listings. To put this in perspective, this was 18% higher than the number of visits recorded on the same date in 2019.

Here at MFS, we also experienced a surge in enquiries due to the pent-up demand. Of course, we have to remember that prior to the lockdown, the property market was thriving; Boris Johnson’s election victory (resulting in the so-called ‘Boris Bounce’) coupled with Brexit progress had resulted in increasing property prices and transaction numbers.

How important has the Stamp Duty Land Tax holiday been in unlocking this pent-up demand?

The stamp duty holiday that was announced by Chancellor Rishi Sunak on 8th June has been hugely influential. Suddenly, lenders and estate agencies faced a surge in enquiries, with buyers hoping to take advantage of potential tax savings of up to £15,000.

According to Halifax, average UK house prices in May 2021 were 9.5% higher than a year earlier, their biggest annual increase since June 2014. This is remarkable, given this rapid price growth has taken place in the midst of a pandemic, with economic uncertainty an ever-present concern for many.

With demand for real estate rising since the start of the stamp duty holiday, there has also been considerable demand for loans to finance these transactions. This is where prospective homebuyers wanting to take advantage of the holiday are encountering some problems.

While buyer demand was booming, the number of mortgage products available fell sharply. Data from Moneyfacts shows that borrowers seeking a 90% LTV deal would have had 779 options to choose from at the start of March. Six months later, their choice was down to approximately 60. This has resulted in brokers and prospective buyers looking beyond the high street and considering alternative options, like bridging loans.

Bridging loans have been increasingly attractive to many buyers over recent months as the stamp duty holiday has drawn near. In a bid to get their transaction across the line before the initial deadline on 30th June, many buyers have looked for bridging finance, which can be deployed in a matter of days.

Has the Stamp Duty holiday increased demand for MFS’ bridging loans?  

Yes, it has, and this has to do with the needs of homebuyers in the UK at the moment. With so much uncertainty in the air, buyers want to act quickly and complete property transactions without delay. However, mainstream lenders are taking longer to process applications, particularly when the circumstances of the borrower are complex.

It has been clear for some time that the backlog of applications being experienced by some mortgage providers will result in many buyers missing out on the tax relief.Specialist providers like MFS deliver bespoke loan solutions, meaning that our bridging loans are tailored to the individual needs of each borrower. This personalised and professional service is exactly what borrowers and brokers are after at the moment. What’s more, loans are deployed quickly, meaning that clients are not at risk of missing out on a transaction.

With mainstream lenders still treading carefully, I anticipate market demand for bridging loans to remain consistently strong in the coming months and years.

How has COVID-19 affected MFS’ products and services? 

The pandemic has made all businesses consider their products, services and how they engage with clients. MFS is no exception. While we have been very busy, we have also had to adapt to changes in the market, not to mention the ways we operate internally.

Positively, MFS has grown its team by more than 40% since the start of 2021. We have attracted three new funding lines this year too, which are worth a combined £400 million.

In April 2021, we amended our bridging loan criteria as well. For one, we have increased our maximum loan amount to £30 million, lengthened our maximum loan term to 24 months, and launched a new development exit product. The changes reflect the changes in demand we have experienced from our lenders.

More recently, we launched 753 (75-cubed), a new initiative designed to fast-track residential property deals in the coming months. We committed have £75 million of funding for residential bridging loans (since bolstered with an additional £50 million of funding) at a loan-to-value of 75% and an interest rate of 0.75%.

Again, these creative initiatives are all about adapting to the market. As a bridging lender, we could not stand still during the pandemic – we constantly had to evolve to deliver the best possible products and services to brokers and private clients.

Finally, what do you think the future holds for the bridging loans market? Where does MFS sit within this?

Despite the obstacles posed by COVID-19, the fact bridging lenders have been actively working with brokers and borrowers to meet their finance needs throughout the course of the pandemic has been extremely significant. At MFS, we have been busier than ever and have experienced significant growth over the past 12 months.

Looking to the future, I believe this will continue to be the case. Borrowers are seeking bespoke finance solutions and want to engage lenders who provide personalised solutions specific to their circumstances. With mainstream lenders still treading carefully, I anticipate market demand for bridging loans to remain consistently strong in the coming months and years. At MFS, our aim is to support the wider recovery of the economy through innovative bridging loan products.

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