February 2020 would have gone down in the records as a promising, maybe even game-changing month for the UK housing market after years of uncertainty. It felt like things were settling down.
Mortgage approvals were up, with 73,500 deals done on funding for property purchases that month alone. It was the highest number in years, an indicator that a vital component in deciding how confident we are in our national economy was on the up.
Clearly, thousands of households were, as usual, on the brink of moving home. And then March happened.
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“The figures feel like they came from another time,” says Andrew Montlake, managing director of mortgage broker Coreco. “Within just a few weeks the property and mortgage markets have gone from strength to abject uncertainty.
“We’re confident things will eventually get back on track, but the great unknown in the current highly fluid environment is: when?
“The hope is that the mortgage market rebounds as fast as it is deteriorating once we come out the other side of Covid-19.
“For now the most important thing is that every lender supports borrowers as best it can in these most challenging times.”
With the UK on lockdown, the usual buzz of activities around new sales and lettings prospects have inevitably ground to a halt.
The buying and selling process can continue to a limited extent and owners are free to accept offers, the government has acknowledged, but warns the process – which is often drawn out at the best of times – could now take significantly longer than usual.
Current government guidelines state that owners should not allow agents or their associates into their property to carry out appraisals and viewings should not go ahead.
Would-be sellers or landlords are being urged to concentrate instead on getting their properties ready for marketing when the lockdown restrictions are eventually eased, with cleaning decorating and repairs high on the to-do list.
“With lettings you need to be more fleet-footed for when the restrictions are lifted,” adds Jeremy Leaf, an estate agent in north London and former residential chairman for the Royal Institution of Chartered Surveyors. “There is more that landlords can do in terms of getting certificates lined up and agreements ready. It’s worth having a checklist so you can ensure everything is covered.”
Transactions in progress
“Given the situation in the UK with regard to the outbreak of coronavirus, we urge parties involved in home moving to adapt and be flexible to alter their usual processes,” the government’s latest guidelines state.
“There is no need to pull out of transactions, but we all need to ensure we are following guidance to stay at home and away from others at all times, including the specific measures for those who are presenting symptoms, self-isolating or shielding. The health of individuals and the public must be the priority.”
Buyers or new tenants of vacant properties can go ahead, but where a property is occupied, the various parties are being encouraged to “amicably agree alternative dates to move”, for a time when stay-at-home measures against coronavirus are likely to be lifted.
“Everything we had in the pipeline has gone forward to exchange and completion so far other than where people have been made redundant or faced a serious downturn in their prospects,” says Leaf.
“Most people are pressing the pause rather than the stop button unless they have to. This is probably because most buying decisions made last month or so are based on deferred decision-making from Brexit so there is plenty of intent to go ahead.
“The reasons for moving probably haven’t gone away thanks to the onset of the virus. And all this enforced confinement has probably accentuated those reasons and made it essential for many others,” he adds.
“The biggest issue is price, and provided buyers and sellers can adjust to the new realities when restrictions are eased and finally lifted, there is no reason why many if not all can’t proceed.”
What about my mortgage offer?
With so many transactions put on ice, lenders – now snowed under with mortgage holiday and term renegotiation applications – have already moved to extend the deadline on existing mortgage offers to allow for property transaction delays. And they’ve taken deliberate action to slow activity through moves like increasing interest rates, lowering loan to value (LTV) ratios and imposing longer turnaround times.
Yesterday, Nationwide, the UK’s second largest mortgage lender, became the latest to announce that it has removed all fixed rate and tracker mortgages above 75 per cent LTV from sale until further notice, either online or through brokers, including buy-to-let, remortgaging, first time buyer and new house purchases. The move doesn’t impact existing applications though.
“Elements of the market are functioning and will continue to do so, such as product transfers, where you stay with your existing lender and move onto a new deal,” adds Mark Harris, chief executive of mortgage broker SPF Private Clients. “Those who are purchasing for cash will also continue to do so … But new build and high loan to value lending are at a standstill.”
How do I deal with move day?
Getting to move day is going to be a massive and unusual achievement in the current climate, with all those professions involved working differently, over necessarily longer time frames, and prioritising the vulnerable, ill or those who need shielding.
Conveyancers, for example, have also been told to warn those in the middle of transactions that there will be delays and that they shouldn’t exchange contracts on an occupied property unless they have made “explicit provision for the risks presented by the virus”.
But for those who have already committed to moving home, and for whom a removals firm is a critical partner, there are more hurdles to overcome in these unprecedented times.
The government is directing removals firms to push for delays to house moves, but acknowledges that a small number may need to go ahead.
They may honour existing commitments only where it is clear that the move date can’t be rearranged as long as the move can be done safely for the mover and the team doing the removals.
The latest government guidance (from 26 March) stipulates that work in people’s properties can continue as long as the tradesperson is well and has no symptoms or a confirmed case of Covid-19.
Throughout the activity, all those present must maintain a two metre distance from others and wash their hands or use hand sanitiser regularly.
More details on the guidelines, measures and precautions for those purchasing, selling and moving home during the Covid-19 crisis, including professionals involved in transactions, are available from the government website.