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Mixed Messages from the Property Market

Real mixed messages coming from the property market right now. Tom Belger, Yahoos Finance and Policy reporter said:

Britain’s property market is “dangerously close to bubble territory” as sales and prices soar, housing industry figures have warned.

A flurry of news this week alone underlines the mini-boom in the market, with activity “off the Richter scale,” as one estate and letting agent put it.

But Britain’s economy has been plunged into a deep recession by the coronavirus. A combination of greater demand for moves post-lockdown and government measures, from furlough and mortgage support to stamp duty cuts, are fuelling the market.

Neither will last forever, and sales and price growth are widely expected to slow, if not go into reverse, in the not-too-distant future. Lenders are also increasingly tightening borrowing rules.

This seems to be good news however the BBC reports:

“Low-deposit mortgage deals available to borrowers have plummeted in recent months as lenders play safer during the economic fall-out from coronavirus.

Borrowers able to offer 10% of the value of a home as a deposit could have chosen from 779 deals at the start of March, data from Moneyfacts shows.

Six months later, the choice was now down to around 60, the financial information company said.

Lenders are being stricter about who they lend to amid fears of defaults.

Some large lenders have already said they would not currently consider applications from people on furlough and who did not have a return to work date.

First-time buyers are at particular risk from the squeeze on mortgages, as they usually have less in savings to use as a deposit.

Rachel Springall, from Moneyfacts, said the situation was “hugely frustrating” for these potential buyers.

“Product availability has plummeted since March, when there were hundreds of deals to choose from. There are now very few. Those who had expected to get a foot onto the property ladder may now hold their plans, particularly if they only have a 5% deposit,” she said.

HSBC became the latest lender to temporarily restrict lending on 90% loan-to-value deals in what one mortgage broker described as a “sign of the times”.

Aaron Strutt, of Trinity Financial, said that lenders had to balance the books, and that meant a spread of borrowers ranging from first-time buyers – who might be more risky if house prices fell – to those borrowing a far smaller proportion of the value of a property.

Self-employed people were also being asked for more information, including bank statements and accounts, when they applied for a mortgage.

Mortgage lending has still picked up since lockdown, with many people trying to secure mortgages after a relatively swift agreement to buy a property during a post-lockdown pick-up in house-buying and prices.

However, there is an expectation that this mini-boom will not last as job losses mount and finances are stretched as government support schemes are wound down.”

There is an element of Déjà vu here, the banks seem happy to lend when supported by the government by way of bounce back loans however they only want to lend to blue chip borrowers off their own back. I appreciate they are concerned about the risk element as we head towards the end of furlough but they risk making the situation a whole lot worse by reigning in all forms of mortgage lending. I logged onto to Moneyfacts  and there were some great deals but only available with massive deposits.

We will see how this pans out I guess but if you need to sell your house quickly during these uncertain times then contact us and we will give you a great offer for a fast sale.