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Mortgage Market Update – July 2021


Changes to the Stamp Duty holiday, that came into effect at the end of June, were just one of the factors impacting the market but what were the others? Our Mortgages Managing Director, Richard Rowntree, provides his thoughts.

With changes to the Stamp Duty holiday coming into effect on the last day of June, some expected a flurry of activity, followed by a sharp decline in business. While we definitely rushed to get cases over the line in time to enable buyers to benefit from savings, we’re yet to see any real slump.  

Although there has been some cooling, our Regional Sales Managers report that buyer demand remains high with multiple offers often received on sales. In turn, this high demand is pushing up prices with agents reporting that above asking prices being agreed in approximately 50% of cases. 

Despite the lifting of restrictions earlier in July, many are still working from home for at least part of the week so requirements like gardens or home office space are still being prioritised over proximity to offices. 

We’ve seen the impact that this trend has had on demand for flats in London but with the downward pressure this has placed on rents, they are now more affordable and starting to get more attention as the lifting of restrictions has seen the phased return of hustle and bustle to city centres. In addition, secondary markets have emerged in some areas where the continuing popularity of staycations has resulted in flats having the potential to also be let on short-term basis to holidaymakers.    

We know that landlords have worked closely with tenants throughout the pandemic, the majority taking an understanding and pragmatic approach to overcome any challenges. Our research found that just over a third (36%) have had a tenant request a change to their rent and these requests have been granted in almost all cases. 

Despite this, there has long been concern that as the financial support provided by the Government’s furlough scheme is withdrawn, some tenants may find it difficult to pay their rent. With recently published ONS figures showing that the number of people on furlough has dropped from a peak of nearly nine million at the height of the pandemic to a maximum of 1.6 million, it is really encouraging to hear reports from letting agents that arrears levels are not rising as some expected.  

This is also supported by recent Paragon research because landlords have reported the fewest number of tenants in arrears since the metric began to be tracked in 2011 and the average amount of outstanding rent has also reached a four-year low. In addition, the proportion of landlords who have had a recent void is now at a four-year low, with just over one in four having a property empty in the last 3 months. 

With A-level results due shortly and the new academic year on the horizon, it has been a busy time for student landlords. Some have experienced a flurry of activity that has now slowed somewhat, some are still seeing enquiries for the forthcoming academic year, while others with the most in-demand properties are already accepting lets for the next academic year. Conversely, a number of landlords are expecting an increase in enquiries after some students were reluctant to sign tenancy agreements earlier in the year.  

We’ve also heard reports of landlords and letting agents who manage large portfolios finding it difficult to schedule necessary redecoration and cleaning works in student HMOs due to the shift to online learning. In some cases, this has been compounded by many more students remaining in properties for longer this summer, either isolating or at the request of their families due to Covid-19 risks.

In these cases, landlords are expecting to carry out the most urgent works prior to re-letting for the next academic year and then catch up in later months when students are back on campus for face-to-face teaching.  

Although not particularly widespread, these reports offer interesting insight into the operational challenges landlords still face despite the lifting of restrictions. With changes on the horizon that will  impact greater numbers, most notably the proposed requirements for all rented properties to have an Energy Performance Certificate rated no lower than ‘C’ by 2028, the industry will have an important part to play in supporting landlords.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551