Foundation Home Loans recently spoke to Julian Sampson, partner and head of lending at TWM Solicitors to get his views on the impact of the stamp duty holiday, how the legal profession is dealing with the impending deadline and what next for the intermediary community.
Foundation Home Loans (FHL): What does the pre-stamp duty deadline look like at the moment from a property conveyancing point of view?
Julian Sampson (JS): As a result of the strong pent-up demand generated over the first lockdown period, the workload of the mainstream residential team at TWM Solicitors increased pretty much as soon as the housing market ‘reopened’ back in May.
As you can imagine, the announcement of the temporary stamp duty holiday in July really opened the flood gates and the team were inundated with cases from day one.
In contrast, the buy-to-let market saw something of a lag compared to the residential market.
What I mean by lag is that we only noticed a big rise in the volume of BTL and more specialist lending cases filter through in September rather than the earlier Summer months as experienced by our residential team.
We were in a position where we knew this was coming and we worked to establish even closer working relationships with our lending partners – such as Foundation Home Loans – so that as soon as offers come through we could instigate an engagement process with the lender, borrower and their solicitors as early as possible.
On a less positive note, this lag is only going to increase the pressure of trying to push a variety of transactions through before the stamp duty deadline.
FHL: What should brokers be focusing on in Q1?
JS: If I were a broker, one thing I would certainly be focusing on when it comes to BTL cases is ensuring that there are tangible financial reasons for hitting the stamp duty deadline.
The reality is that there will be many cases where this deadline becomes largely academic if the incorporation or addition to the portfolio has been well thought through and costed accordingly.
This is because we are applying certain reliefs, structuring properties in certain ways or using mechanics and logistics within the legislation so that we are not having to discharge any stamp duty. Hence, the stamp duty becomes largely academic.
So, what brokers could potentially do is stagger these types of cases and advise these types of clients that they don’t need to get involved in the stamp duty bun fight.
This will then offer brokers a pipeline of cases which can be revisited post-deadline where certain clients can benefit from spending a little more time plotting a future course for their portfolios and being in a position to benefit from the post-March opportunities which will continue to emerge.
FHL: What will the intermediary world look like after the stamp duty deadline?
JS: Extremely healthy. As I touched upon, the mortgage market will not end on the 31st of March. Capital tax friendly opportunities will continue to emerge, especially in markets like holiday and short-term lets.
For tax purposes, holiday and short-term lets are considered more of a business proposition than say an investment proposition within BTL portfolios, meaning many landlords are holding back or releasing equity to capitalise on opportunities in the Spring and Summer months.
Other opportunities will arise across the residential and remortgage markets which are being driven by an uncertain economic climate. Whether this is through changes to employment, unemployment, for self-employed people or even landlords who are struggling with rental voids or gaps in their income.
There will be a greater need for a robust, professional advice process as market conditions will become even more complex due to shifting lending demands around income requirements, furlough and mortgage payment holidays, amongst other factors.
Many opportunities will still be there for brokers when they wake up on the 1st of April but we also have to accept that for the moment at least, everyone is going to be incredibly busy in the meantime.
FHL: What tip would you give to intermediaries in 2021?
JS: The relationship between the broker and the solicitor is more important than ever in the specialist lending market and this really needs to work as a partnership.
As with any partnership you share and you engage collectively. So, missing one part of the loop – for example, the law firm – means that there is going to be a lot more of a reliance in the broker.
It’s all about working together and ensuring that all links in the chain are ready – in terms of having all the relevant information in place – and fully aligned as early on in the process as possible.