22-05-2020

With the gradual easing of lockdown restrictions and rapid and dramatic changes to the wider economy, market providers are adapting with new products, service levels and criteria.

We look over recent developments in the mortgage market and how these affect everyday house buying.

Stay Alert! is the main message as we venture out of our homes and blink in the sunlight. The easing of lockdown restrictions have enabled the property market to gradually come back to life. Products, service levels and criteria are changing daily as everyone involved in the housing market tries to work within the current boundaries to find safe and efficient ways forward.

My mortgage is on hold waiting for a valuation, when will I get a mortgage offer?

Lockdown meant valuers were immediately stopped from carrying out physical valuations. Lenders worked around this as best they could with automated valuations however some properties just don’t fit into a tickbox model and need a physical inspection. We have had some cases on hold since March waiting for a valuation. RICS (the Royal Institute of Chartered Surveyors) has been quick to react and provide clear information which now allows valuers to carry out physical inspections in a safe consistent manner. If you are waiting for a valuation to be booked on your property you may find the following guidance informative:

RICS recommendations on physical inspections for the purpose of residential valuations and condition-based surveys during COVID-19 (England)

Lenders are therefore working through their pipelines of cases on hold and we think most lenders hope to have completed the outstanding valuations in their pipelines by mid June. There is a huge backlog of cases to work through and they are working through them in chronological order.

I have a purchase agreed but need to borrow 90%, when can I get a mortgage?

This week lenders have started to bring back higher loan to value products. We now have a handful of highstreet lenders lending at 90% and we expect this figure to increase over the next few weeks. Please however bear in mind the size of the mortgage you require. Most lenders lending at 90% will currently restrict the loan to around to a maximum level of say £400,000 to £500,000. This could change over the coming weeks so it’s always best to pop us an email or call to check. We also think it unlikely that 95% lending will come back to the market anytime soon.

Do we expect a fall in house prices?

Everyone expects the recent situation to have some kind of knock-on effect on house prices. Many different factors are involved here. Currently the housing market seems resilient however issues with the job market will ultimately have an effect on how many people can get a mortgage, whether existing mortgages go into default and the deposit funds which may be available for purchase.

The Bank of England has indicated they are modelling a 16% fall in house prices. If you have some time on your hands, you may like to read the Interim Financial Stability Report for May 2020 (the house-price section is around page 25!).

We have already seen an increase in enquiries from clients looking to refinance existing property in order to buy more property quickly when they feel house prices have hit the floor.

We are however always the optimists and wonder whether the drop will be this severe.

There is still a lot of demand out there from standard buyers and we also have many clients looking to have mortgages agreed in principle so they are in the best position to offer on property when it comes on the market.

Lockdown has forced people to re evaluate where they live and we think we may see an uplift in clients looking to purchase houses opposed to flats and property with bigger gardens.

Lastly, the furlough scheme has been extended to the end of October. The Government has also just extended mortgage payment holidays by a further 3 months to October. The exit from furlough needs to be properly managed alongside mortgage payment holidays. If this is not done we could see a sharp increase in unemployment and this could have a knock on effect for property prices, particularly in the lower sector of the market.

At present Government intervention is doing it’s thing. We now have a waiting game to see how the UK is weaned off this intervention and how this affects the market.

As always, if you would like to chat over your options please get in contact by email enquiry@foxdavidson.co.uk or give us a call.