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How will mortgages and the housing market be impacted by coronavirus?

How will mortgages and the housing market be impacted by coronavirus?

TIC Finance are property finance experts that provide property funding solutions and specialise in stopping house repossession.

With the Coronavirus pandemic continuing to impact the economy from all angles, there has been a great deal of concern regarding the UK’s housing market. With many businesses grinding to a halt, and Brexit already having an impact on the property market, how exactly are house prices and mortgages going to be impacted by the pandemic?

What we know so far: pre-lockdown house prices 

Following the general election in December, house sales saw a slight increase by over 12% in January, however, Zoopla stated that house sales are predicted to plunge as much as 60% in the second quarter of the year in comparison to the same period in 2019, clearly indicating the drop in house sales the market is likely to experience. The demand for buyers was significantly lower prior to the lockdown as a large number of sales began to fall through. As the situation

has rapidly developed and estate agents forced to close their doors, many buyers and sellers are having to postpone their previous, pre-lockdown plans.

Key stats and predictions 

  • 2020 began with slight optimism due to a 12% increase in house sales in January, but this is now set to plummet.
  • Latest House Index data reveals overall house prices fell by 1.1% month-on-month but grew by 1.3% year-on-year to reach £231,185 but grew by 1.3% year-on-year to reach £231,185.
  • 175 million house sales recorded last year, expected to fall to just 734,000 this year.
  • Nationwide found that house prices increased by £3000 in March, but these figures don’t cover the official lockdown period
  • Halifax claims that house prices increased by 3% year-on-year in March but saw fewer transactions making it difficult to calculate house price changes in the next few months.

Although the latest data reflects a slight increase in house prices, it isn’t particularly useful in determining the impact coronavirus is having on the housing market as the data is from January. However, it will be difficult to understand for definite the impact coronavirus will have on the property market for a few months.

What impact will coronavirus have on house prices? 

As we’re still in the early stages of the pandemic, it’s too early to give an exact answer to this question. However, the housing market is likely to follow the rest of the economy. Many people predicted that house prices would crash during Brexit, but the UK market proved to fairly strong at a time we expected it to fall apart.

House sales are definitely going to be coming to a pause, not only due to the closing of estate agents and the increasing difficulty surrounding the logistics of a house sale (viewings, etc), but also because of the reality of the situation. Looking for a new property in the middle of a lockdown isn’t realistic or a good idea, meaning many buyers and sellers will have to postpone their original plans. It has been predicted that house prices will fall this year, by around 3% but should bounce back by 5% in 2021. This is reliant on the following things though:

  • Government incentives and low-cost mortgage lending to support homeowners
  • Lowered numbers of forces dales
  • Safe and effective house viewing procedures

Mortgages and coronavirus 

One positive of the situation is the support the government is offering not just to homeowners, but also to businesses across the UK. With a number of different schemes and loans on offer, there is plenty of options for everyone during this difficult and unpredictable time. As a result of this, it’s also a great time to get a mortgage if you’re able to reach a lender. Mortgage rates have dropped, however, building societies and banks have removed many of their services in order to adapt to the economy amidst the pandemic. What we are seeing though, is a gradual return of products and services to the market which is promising, particularly for anyone wanting to apply for a mortgage in the coming months.

What support am I eligible for? 

If you are a homeowner, you can also apply for a mortgage holiday which allows you to pause your mortgage payments for three months and repay them at a later date. If you’re worried about the current financial situation and are a borrower, you should contact your mortgage provider directly to go through the options available. Other potential options include temporary interest deferrals, switching to an interest-only basis as a short term solution, or extending the term of your mortgage.

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