Mortgage enquiries declined by a steep 37 percent from March to April in a shock blow for the UK property market, wreaked by the coronavirus outbreak. The new data from online mortgage broker Trussle painted a stark, yet dire picture for mortgages during the period of lockdown, as implemented by the government. The government effectively placed a temporary freeze on the housing market to prevent transmission of COVID-19 throughout the UK.
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Housing Secretary Robert Jenrick, however, recently announced England’s housing market would be restarted, with estate agents now able to open.
Viewings can also be carried out, with conveyancers permitted to return to operations.
However, social distancing rules must stay firmly in place in order to prevent the disease from spreading with movement of people.
The question, though, of how the housing market will cope after its stagnation during lockdown is yet to be answered.
It appears first-time buyers have been forced to absorb some of the shock to the market, with mortgage applications reducing by 35 percent year-on-year during April.
Also notable was a 53 percent decrease in submissions between March and April 2020.
While the specific reasons for this decline are not totally clear, mortgage applications were made difficult when brokers pulled products off the market.
When the Bank of England imposed an unprecedented base rate cut to 0.1 percent in March, brokers rapidly removed some of their products.
Research from Moneyfacts stated the number of available products halved from 5,222 deals at the beginning of March to 2,566 at the start of May.
And brokers have also been forced to reckon with mortgage payment holidays imposed by the government and Financial Conduct Authority (FCA).
Under these measures, all existing mortgage holders could gain a three month freeze on their mortgage payments.
However, the research from Trussle also showed good news for current mortgage holders.
Applications for remortgage rose by 110 percent year-on-year in April.
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According to the online broker, borrowers who remortgage could save £334 per month.
The data on remortgaging suggests homeowners are looking to save money by finding better rates, and remortgaging calculators can also help with this process.
However, for those who have been furloughed as a result of the crisis, extra caution should be taken.
While lenders are usually willing to accept furloughed income, it must be proven that a person is going back to work.
Additionally, some brokers are only looking at furloughed salaries when taking into account how much a person can borrow.
Commenting on the findings, Miles Robinson, Head of Mortgages at Trussle, said: “As the coronavirus crisis continues to impact people’s livelihoods, those who have been furloughed are naturally likely to be concerned about their mortgage applications.
“During these difficult times, many lenders will only consider 80 percent of a furloughed customer’s income in affordability calculations, provided that the applicant has confirmation that they’ll be going back to work. As there’s a monthly cap of 80 percent of salary paid up to £2,500 for furloughed workers, people earning more than this will be impacted more significantly. Many lenders are also hesitant to consider overtime and bonuses at this point in time as it is certainly not guaranteed income.
“While other lenders won’t accept furloughed customers at all, we’ve seen flexibility from those who are accepting customers on furlough and we’ve helped a number of customers in this position to secure mortgages. The criteria has been changing frequently during these times, so anyone who has been furloughed should seek professional mortgage advice.”
Although the property markets in Wales, Scotland and Northern Ireland remain closed, it is thought these could open in the coming weeks as lockdown measures change.
Mr Jenrick, however, states plans for England will help give the market a boost.
He said: “Our clear plan will enable people to move home safely, covering each aspect of the sales and letting process, from viewings to removals.
“This critical industry can now safely move forward, and those waiting patiently to move can now do so.”
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