Since 13 May, people in England have once again been allowed to move house and rent property. After over six weeks of lockdown, this change came as a blessed relief to the housing market, particularly for the people involved in the estimated 450,000 property transactions put on hold because of the coronavirus pandemic.
Once again, estate agents offices’ are open, viewings and surveys are allowed, and removal companies are able to operate. New builds are also, at last, building. Of course, this has meant that mortgage companies have been unable to lend to new buyers, but there has been some pessimism surrounding whether they will be willing to now in our current economic climate.
What are we likely to see in the mortgage market after COVID-19 lockdown?
It seems likely that house prices will drop post-pandemic, some experts believing by around 4%, though of course at this point it is all conjecture. We are fortunate in the UK to have an extremely resilient housing market, so a fall is much more unlikely than the US and other parts of Europe, where homes stand empty.
People will be worried about their incomes and less willing to put in offers. There may well be a wait and see feel to the market, which is understandable when the economy has had such a battering.
Knight Frank estimates that some half a million home sales simply won’t happen at all and be “lost”. However, with record low-interest rates and a lower than expected number of houses being built, it is hard to see why prices should fall more than 7%, if even that much.
Would a house price fall in the UK be all bad?
Obviously, if you’re selling, yes, but falling prices may not be all bad. Homeownership has become more and more difficult as house prices rise year on year at rates outstripping income growth. Getting your foot on the first rung of the property ladder is difficult enough already and impossible for many, so a little cooling off might actually help more young people to become homeowners.
Any fall is likely to be fairly short term. The Royal Institution of Chartered Surveyors (RICS), usually a good guide to the metrics relating to the housing market, suggests that sales will recover in as little as nine months although prices may take around two months more.
How will mortgage lenders react?
How all this will affect mortgage lenders is not clear – but they certainly won’t stop lending. On the one hand, historically low interest rates should be reflected in more affordable borrowing, but on the other, banks and other mortgage lending institutions will be concerned that applicants’ employment and income is secure not just now but in the future.
So, although lenders will want to lend, they will be extremely wary of who they lend to. This could result in fewer successful applications and some disappointed prospective homeowners. If traditional mortgage lenders fail to deliver, prospective buyers will likely look to specialist lenders for help.
Lenders’ mortgage products are rapidly evolving to meet the changing circumstances with an emphasis being put on looking after their current customers, many of whom must be experiencing problems, while still trying to service new business. The government is keen that mortgage companies extend their lending. The Financial Conduct Authority, HM Treasury and the Bank of England are all emphasising the need to keep the money flowing even under the prevailing financial circumstances and pass on the benefits of the government’s economic initiatives to the consumer.
How will the mortgage process change in the coming months?
The legacy of the coronavirus may include wholesale changes to mortgages and the whole house buying procedure. There may be a move away from a physical survey to a virtual one, and this may actually benefit buyers and lenders. Arranging an appointment for a surveyor to visit a property always has the potential to slow the whole mortgage application process and cause a bottleneck in what is already a drawn-out procedure.
Digital signatures may become acceptable across the board, rather than the wet ink, traditional, witnessed signature that is currently the norm. Bearing in mind that solicitors are not famed for embracing new technology, this may seem a pipe dream, but it will happen, and COVID-19 could mean it comes sooner rather than later.
What should you be aware of if you’re looking to get a mortgage soon?
If you’re ready to move home and are worried about whether or not you’ll successfully get the mortgage you would have before the pandemic, don’t panic. While things have changed (at least temporarily), it’s not impossible. Here’s what mortgage lenders are going to be looking for:
Since 13 May, people in England have once again been allowed to move house and rent property. After over six weeks of lockdown, this change came as a blessed relief to the housing market, particularly for the people involved in the estimated 450,000 property transactions put on hold because of the coronavirus pandemic.
Once again, estate agents offices’ are open, viewings and surveys are allowed, and removal companies are able to operate. New builds are also, at last, building. Of course, this has meant that mortgage companies have been unable to lend to new buyers, but there has been some pessimism surrounding whether they will be willing to now in our current economic climate.
What are we likely to see in the mortgage market after COVID-19 lockdown?
It seems likely that house prices will drop post-pandemic, some experts believing by around 4%, though of course at this point it is all conjecture. We are fortunate in the UK to have an extremely resilient housing market, so a fall is much more unlikely than the US and other parts of Europe, where homes stand empty.
People will be worried about their incomes and less willing to put in offers. There may well be a wait and see feel to the market, which is understandable when the economy has had such a battering.
Knight Frank estimates that some half a million home sales simply won’t happen at all and be “lost”. However, with record low-interest rates and a lower than expected number of houses being built, it is hard to see why prices should fall more than 7%, if even that much.
Would a house price fall in the UK be all bad?
Obviously, if you’re selling, yes, but falling prices may not be all bad. Homeownership has become more and more difficult as house prices rise year on year at rates outstripping income growth. Getting your foot on the first rung of the property ladder is difficult enough already and impossible for many, so a little cooling off might actually help more young people to become homeowners.
Any fall is likely to be fairly short term. The Royal Institution of Chartered Surveyors (RICS), usually a good guide to the metrics relating to the housing market, suggests that sales will recover in as little as nine months although prices may take around two months more.
How will mortgage lenders react?
How all this will affect mortgage lenders is not clear – but they certainly won’t stop lending. On the one hand, historically low interest rates should be reflected in more affordable borrowing, but on the other, banks and other mortgage lending institutions will be concerned that applicants’ employment and income is secure not just now but in the future.
So, although lenders will want to lend, they will be extremely wary of who they lend to. This could result in fewer successful applications and some disappointed prospective homeowners. If traditional mortgage lenders fail to deliver, prospective buyers will likely look to specialist lenders for help.
Lenders’ mortgage products are rapidly evolving to meet the changing circumstances with an emphasis being put on looking after their current customers, many of whom must be experiencing problems, while still trying to service new business. The government is keen that mortgage companies extend their lending. The Financial Conduct Authority, HM Treasury and the Bank of England are all emphasising the need to keep the money flowing even under the prevailing financial circumstances and pass on the benefits of the government’s economic initiatives to the consumer.
How will the mortgage process change in the coming months?
The legacy of the coronavirus may include wholesale changes to mortgages and the whole house buying procedure. There may be a move away from a physical survey to a virtual one, and this may actually benefit buyers and lenders. Arranging an appointment for a surveyor to visit a property always has the potential to slow the whole mortgage application process and cause a bottleneck in what is already a drawn-out procedure.
Digital signatures may become acceptable across the board, rather than the wet ink, traditional, witnessed signature that is currently the norm. Bearing in mind that solicitors are not famed for embracing new technology, this may seem a pipe dream, but it will happen, and COVID-19 could mean it comes sooner rather than later.
What should you be aware of if you’re looking to get a mortgage soon?
If you’re ready to move home and are worried about whether or not you’ll successfully get the mortgage you would have before the pandemic, don’t panic. While things have changed (at least temporarily), it’s not impossible. Here’s what mortgage lenders are going to be looking for:
- Strong ownership to borrowing ratio – 5-10% deposits aren’t likely to get them excited, so if you can pay for 25% of your home or more, you’re going to be in a much stronger position.
- Strong career history – They’ll be looking for people who have withstood the pandemic in good financial standing with a long history of financial stability.
- Low debt – as always, the lower your debt from other sources such as credit cards and loans, the better your chances. If you’re getting ready to borrow, paying down credit card debt now will put you in a stronger position.
- Buying within your means – lenders will be even warier and want to see that you can fully afford what you’re asking for. If you can buy well within your means (affordability), they’ll be much more likely to lend to you.
The thing to remember is that you need to go into your mortgage application with your eyes open, having done your research. You want to know (or at least think) that they should have no reason not to lend to.
We know that getting a mortgage now is more stressful than it was even six months ago, and at Red Star, we can be your guide through the maze of available options to make sure you get the mortgage that is right for you and your individual circumstances. Click here to find out more.