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Covid sharpens inequalities in UK housing market

The Covid crisis has widened inequalities in the UK housing market, according to new research published today.

Figures from building society Nationwide show one in four private renters think the pandemic has made it more difficult for them to buy a home.

Sharp rises in house prices over the last year, driven by demand being stoked by the stamp duty holiday and prospective homebuyers rushing to snap up larger properties with gardens, has reduced housing affordability for first-time-buyers.

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Research from property search site Rightmove shows house prices jumped 5.7 per cent annually in July to reach a record high.

Homeownership rates have dropped markedly over the last 15 years, the research shows. 57 per cent of households in the UK now own their home, compared to 64 per cent in 2003.

63 per cent of the country also thinks the UK has a housing crisis, underlining the need to increase home supply to ease inflationary pressures in the market.

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Sara Bennison, chief product and marketing officer at Nationwide Building Society, said: “Our research and cross-industry conversations show that the pandemic has served to exacerbate long-standing issues in the housing market.

“Layer onto that the enormous challenge of making the UK’s homes net zero and the challenge ahead becomes even greater.”

By Jack Barnett

Source: City AM

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Pent-up demand pushes up competition for property despite coronavirus

Years of pent-up demand are driving up competition for UK properties despite the coronavirus pandemic, a new survey from estate agent Knight Frank has found.

The firm found that discounts are still being negotiated due to the ongoing downturn caused by the pandemic, but sellers are fast hardening their resolve as demand grows more quickly than supply.

The number of new prospective buyers registering was 94 per cent higher than the five-year average in the week ending 25 July, compared to a 54 per cent increase in property listings.

According to the survey, the imbalance is the same in London and in the rest of the UK, suggesting that competition is growing all around the country.

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Knight Frank’s head of UK residential research said that a number of factors meant that prices were now “firmer” than they were a year ago.

“What’s happening is the release of pent-up demand that has been building for years against the backdrop of Brexit, tax changes and tighter lending rules”, he said.

“This is putting upwards pressure on prices. In fact, prices are firmer now than they were a year ago, based on the level of offers made and accepted.”

In July the average offer was accepted at 98 per cent of the asking price, one per cent higher than in the same month last year.

Similarly, offers made have gone from 94 per cent to 95 per cent over the last 12 months. Indeed, there have been numerous instances where agreed prices have exceeded the asking price in recent weeks.

Bill added: “I would expect the market to eventually self-correct as there is probably only so far prices can climb against the backdrop of a global pandemic.

“What should simultaneously begin to emerge is what the new longer-term normal looks like. The property market will be no different from many other sectors of the economy in that respect.

“It will ultimately depend on issues outside of its control including vaccine development and the government furlough scheme but for now, prices are heading in one direction.”

By Edward Thicknesse

Source: City AM

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Stamp duty holiday: What does it mean for the UK housing market?

In a “mini-budget” spring statement tomorrow chancellor Rishi Sunak is expected to announce a range of measures to boost the economy which has been ravaged by the coronavirus crisis.

As part of the package the chancellor is reportedly planning to cut stamp duty for properties worth up to £500,000 in a bid to reinvigorate the housing market after it was brought to a standstill by the coronavirus lockdown.

Data published this morning by Halifax showed that UK house prices fell for the fourth month in a row in June – the first time since 2010.

Estate agents and property industry groups have been urging the government to grant a stamp duty holiday throughout the coronavirus crisis, in a bid to encourage nervous buyers.

The Royal Institution of Chartered Surveyors (Rics), Knight Frank and Zoopla were among those in the sector to call for a cut to stamp duty.

What is a stamp duty holiday?

Stamp duty is a tax paid by property buyers, and the amount paid depends on the area of the UK, the value of the property or land and whether or not you are a first time buyer.

In England and Northern Ireland buyers pay the tax on properties sold for more than £125,000, although first-time buyers only pay stamp duty on deals worth more than £300,000.

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For non-first-time buyers the tax is two per cent up to £250,000, five per cent up to £925,000, 10 per cent up to 1.5m and 12 per cent above £1.5m.

Sunak is expected to say he will raise the property tax threshold to as high as £500,000, four times its current level. That would exempt most homebuyers from paying any stamp duty for up to a year, the Times reported.

Who would benefit from the changes?

Experts said that buyers with big deposits that are looking to purchase a home in a more expensive area will benefit the most from the tax cut. First-time buyers could benefit depending on where they are looking to buy a house.

Legal & General Mortgage Club director Kevin Roberts said: “The latest stamp duty holiday proposals look to be another step in the right direction and make for positive reading for first-time buyers.

“Our new research suggests that first-time buyers could be the engine that drives the housing market forward this year, with 93 per cent still planning to purchase a property in 2020.

“A stamp duty holiday would bring more savings to these people planning to step onto the ladder. Our research revealed that many prospective homeowners have already been managing to save extra during the lockdown – an average of £107 a week in fact.”

However, Rightmove property expert Miles Shipside said that a stamp duty holiday would not benefit most first-time buyers without better mortgage availability.

Rightmove’s Property Expert Miles Shipside said: “Buyers in higher priced areas with bigger deposits would benefit most if the stamp duty threshold was raised to £500,000.

“If it is included in the summer update it needs to be made clear what it would mean for people home hunting or currently going through the conveyancing process right now, as an announcement now that doesn’t come into play until the autumn will only lead to people delaying their plans.”

“There have been similar packages in the past which were focused on people buying their first home, but the suggestions are that this new proposal will be for all buyers,” Yorkshire Building Society’s strategic economist Nitesh Patel added.

“This will benefit homeowners looking to upsize and downsize, as well as first-time buyers in high-value areas.”

What would a stamp duty holiday mean for the UK housing market?
Property experts anticipate that tomorrow’s announcement could boost housing activity, although they warned that changes must be implemented straight away to avoid buyers holding out until autumn.

Yorkshire Building Society’s strategic economic Nitesh Patel said: “We have yet to see the full details of a stamp duty holiday package, but if the speculation is correct then buyers purchasing a property of up £500,000 from the Budget announcement in the Autumn stand to save between £10,000 and £15,000 – which is a substantial amount and should boost housing activity.

“But, it would be even better if the changes came into force straight away rather than waiting until the Autumn.”

Patel added: “ Mortgage rates are near to record-lows, which is also likely to help the housing market over the coming months, particularly for those buying more expensive properties. I would also expect more homes to come on to the market, particularly around this price bracket, as the stamp duty cut would improve the saleability of their home.”

Bricks & Logic founder Matthew McDwyer added: “We may not see an immediate spike in asking prices to the level we saw in 2015, but it will definitely support the market and we will perhaps see slight price increases for the cheaper to middle range of the market.”

“However, any reduction in stamp duty on second homes or investment properties could spike new demand from overseas investors or landlords,” McDwyer said.

By Jessica Clark

Source: City AM

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Homeowners set to be able to extend mortgage payment holidays

Those struggling to pay their mortgage due to coronavirus are set to be able to extend their payment holidays for three more months, or start making reduced payments, in proposals published today.

On 17 March, banks agreed with the Chancellor that they would offer ‘forbearance’ (tolerance and help) on mortgages, meaning they all should offer those struggling a three-month ‘holiday’, allowing customers a temporary break from having to make mortgage payments during this time.

Over 1.8 million mortgage payment holidays were taken up, and the first of these will be ending in June. But an extension of another three months will now likely be available.

The Financial Conduct Authority’s (FCA’s) new draft guidance also includes an extension of the application period for an initial mortgage holiday until 31 October 2020, so that customers who haven’t had a payment holiday and are experiencing financial difficulty will be able to ask for one.

The current ban on repossessions of homes will be continued until 31 October as well.

Full info on what the FCA expects mortgage lenders to do?

At the moment, these proposals aren’t confirmed. The FCA says it welcomes comments on them until 5pm on Tuesday 26 May, and then expects to confirm them shortly afterwards. Here’s what it’s proposing:

  • If you’ve not had a mortgage payment holiday, you’ll have until 31 October 2020 to apply. Customers who are making repayments now but get into financial difficulty later will be able to request a payment holiday until 31 October.
  • If your payment holiday’s ending, you can ask for another three months if you’re still struggling. Lenders should continue to support customers who have already had a payment holiday where they need further help, unless granting a further mortgage holiday would create its own financial difficulties.
  • Firms are expected to contact customers on mortgage payment holidays and find out what they can repay and, for those who remain in temporary financial difficulty, offer further support. As part of this, firms should consider a further three-month payment holiday.
  • If you can make full or partial payments, you should do so. At the end of a payment holiday, firms should find out if customers can resume payments, or part payments. If so, your lender should contact you to agree a plan on how the missed payments will be repaid, which could include spreading the cost of payments over the remaining mortgage term, or extending the mortgage term.
  • The current ban on repossessions of homes will be continued until 31 October 2020.
  • Payment holidays and partial payment holidays won’t go down as a missed payment on your credit file. However, the FCA says that consumers should remember that credit files aren’t the only source of information that lenders can use to assess how creditworthy someone is.

The FCA adds that these recommendations are minimum standards and that they don’t stop firms from going above and beyond, for example, by offering reduced interest.

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Buy-to-let mortgages aren’t technically covered by today’s announcement as they’re not regulated by the FCA. Yet if a lender is regulated for its residential mortgage business, the FCA says it also looks carefully at how these firms carry out their unregulated buy-to-let business, so it’s hoped that some mortgage lenders will offer the extensions to their landlord customers too.

What impact could a mortgage holiday have on my credit score?

As Martin and the FCA have pointed out, while mortgage payment holidays won’t be marked as missed payments on your credit report, they could still have an impact on your wider creditworthiness, as lenders can find out about them through bank statements or ‘Open Banking’ data, and can factor them in. As Martin says…

‘We wait to see how substantial the impact will be – but those who need a mortgage holiday should still do it’

The FCA has confirmed, sadly, that while credit files shouldn’t be impacted by mortgage or other payment holidays, lenders are still allowed to take them into account when making their acceptance decisions.

It’s impossible to say yet how widespread this will be or how substantial the impact will be – we’ll start to learn that over the next year. Each lender’s assessment process is different; it’s a dark art that’s hidden from the public and never published, so this is likely to be yet another factor applicants will need to navigate.

Certainly many new challenger financial firms talk about their new, more sophisticated customer assessment models, that they believe are better than just relying on credit files. It’s that very fact that sparked me to look at this in the first place. And as they will be able to see that someone has temporarily not paid their mortgage, they can spot payment holidays.

My hope is that as these holidays are specifically for the short-term financial hit of coronavirus – and as the practice is so widespread – it won’t be used by many firms, and where it is it won’t tarnish individuals’ credit reputation for too long. But there’s no real way to know.

Most importantly, I don’t believe this should stop anyone who needs a mortgage holiday from getting one – if it’s crucial for cash flow, just do it. Yet for those on the border, who may find it temporarily useful but can cope without it, add this to the fact that interest racks up during the payment holiday and I’d err on the side of caution.

What does the FCA say?

Christopher Woolard, FCA interim chief executive, said: “Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

“Where consumers can afford to restart mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a mortgage payment holiday will also continue to be able to apply until 31 October.”

By Callum Mason

Source: Money Saving Expert

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UK house market to restart as government relaxes regulations

The government has relaxed lockdown rules from tomorrow to allow the UK house market to restart.

Under the new regulations people will be able to visit estate agents, view properties and move house without breaking lockdown rules.

Those involved will be expected to observe social distancing rules and wear gloves or masks where necessary.

The UK’s housing market has effectively been frozen since tough coronavirus lockdown restrictions were introduced in March.

David Cox, chief executive of ARLA Propertymark, said: “It’s great news for consumers and the industry that the housing market is being opened up and people can let, rent, buy and sell properties again.

“The new regulations provide clarity to agents and will allow them to deal with pent up demand from consumers.

“It’s also a step to reinvigorating the housing market and will be a boost to the economy.”

Recent figures from estate agents Knight Frank showed transaction numbers in the week ending 2 May were 54 per cent below their five-year average.

However, data on new buyer registrations suggested that people are starting to prepare for life after the lockdown.

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In the week ending 28 March registrations were 77 per cent below the five-year average for London. By 2 May this narrowed to a decline of 60 per cent, while the number of new prospective buyers doubled over this period.

Analysts have predicted that house prices will fall as a result of the pandemic which has hit the economy hard.

“History tells us that house prices tend to fall when the economy shrinks as a result of falling output,” says Richard Donnell, research director at property platform Zoopla.

“[This] has a knock on impact for unemployment or higher borrowing costs – all things that can result in more ‘forced sellers’.”

“Thus the scale of the impact on house prices depends upon the scale of the economic impact from Covid-19.”

By James Booth

Source: City AM

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Why UK property will endure COVID-19 better than most

The UK Government’s implementation of strict social distancing laws in a bid to contain COVID-19 have been affecting the ways that businesses are able to operate, and how consumers are able to manage their finances.

At the moment, the government is providing the financial stimulus necessary to ensure the private sector is able to overcome the initial challenges posed by COVID-19 and the associated lockdown measures.

The direct and indirect impact of COVID-19 has affected the performance of different sectors and financial markets in different ways. The world’s major indices have suffered considerable losses – recently, it was reported that The Dow Jones Industrial Average crashed by almost 32%.

Other financial assets have so far proven resilient, such as UK real estate. I explore the reasons why this has been the case and what recent statistics tell us about property’s projected performance below.

The ‘Boris bounce’

House prices are typically used as an indicator of capital growth for real estate. In 2019, the political deadlock over Brexit resulted in significant market uncertainty and modest house price growth.

Some commentators feared house prices would drop significantly as a consequence of Brexit – however unlikely such events actually were.

Boris Johnson’s victory in the 2020 General Election and his subsequent ability to pass the EU Withdrawal Bill through parliament resulted in surging investor interest in residential real estate. House Price Indexes for March 2020 provided evidence to this affect.

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Both Halifax and Nationwide recorded that average residential property prices that month were 3% higher than they were the year prior.

With Brexit uncertainty forgotten, sellers were again eager to place their properties on the market. Coupled with the government’s growing excitement about ushering their new ‘housebuilding revolution’, it seemed that the UK was finally ready to confront the ongoing housing crisis and match the growing demand for housing with the adequate level of supply; generating strong increases market activity and a return of strong value returns all-round.

COVID-19 has put a pause on transactions

Lockdown measures imposed by the government in a bid to contain the COVID-19 outbreak has had a significant impact on the real estate market.

For the moment, the government is actively discouraging people from buying and selling properties, and some lenders have reacted to this news by deciding not to take on new enquiries.

However, I believe the momentum around the post-‘Boris Bounce’-market has not disappeared. In fact, in lieu of transactions being available, pent-up demand is likely to further exacerbate market activity once the pandemic is over.

Global realtor Savills, in November 2018, forecasted that the average UK property’s value would increase 15% by 2024 – assuming a majority government is elected and a Brexit deal is agreed.

Although both of these events occurred, COVID-19’s economic disruption could have been a new impetus for Savills to revise this figure. However, Savills is confident that long-term demand for UK real estate will drive prices higher, resulting in them not changing their original projection.

Short-term forecasts were revised to take into account significantly the decreased transactions levels expected for the next two months or so, but the long-term predictions for growth weren’t altered.

Ultimately, it can be said that COVID-19 has, in a sense, taken the place of Brexit uncertainty in artificially supressing market activity and, thus, property price growth.

It is also worth mentioning that COVID-19 is a public health crisis, not an economic one. This means that once the virus is contained there is no reason to suggest why the property market will not make a quick recovery.

That’s why I am confident we will see a surge in activity once lockdown measures are lifted and the virus outbreak has been effectively resolved.

By Jamie Johnson

Source: Mortgage Introducer

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Too early to assess long-term impact of lockdown on UK housing market

The latest Halifax House Price index figures for quarter ending March will not yet reflect the affects the lockdown has had on the housing market.

It was reported that house prices in March were 3.0% higher than in the same month a year earlier, but on a monthly basis, house prices were flat at 0.0%. In the latest quarter (January to March) house prices were 2.1% higher than in the preceding three months (October to December)

Russell Galley, Managing Director, Halifax, said: “The UK housing market began March with similar trends to previous months, as key market indicators showed a sustained level of buyer and seller activity. Overall average house prices in the month were little changed from February’s record high, while annual growth nudged up to 3%.

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“These factors all underlined a positive trajectory and increased momentum in the early part of the year, with confidence rising as political and economic uncertainty eased. However, it’s clear we ended the month in very different territory as a result of the country’s response to the coronavirus pandemic.

“On a practical level, most market activity has been paused, with the public rightly following advice to stay at home, and estate agencies, surveyors and conveyancers temporarily closing as a result. With viewings cancelled and movers being encouraged to put transactions on hold, activity will inevitably fall sharply in the coming months. It should be noted that with less data available, calculating average house prices is likely to become more challenging in the short-term.

“However, it’s still too early to properly assess what potential long-term impacts the current lockdown might have on the UK housing market. While there is very significant uncertainty at the moment, much will depend on the length of time it takes for restrictions to be lifted, the pressure that has been exerted on the economy in the meantime and the effect this has on consumer sentiment.

“Lenders have stepped up to offer their support, giving customers up to an additional three months to complete their home purchase at the agreed mortgage rate, alongside payment holidays for existing customers. We continue to have confidence in the fundamental strength of the housing market and remain.”

Source: Property118

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Banks offer mortgage repayment holidays due to coronavirus

High street banks RBS, NatWest, TSB, Virgin Money and Santander will allow those affected by coronavirus to defer mortgage and loan repayments.

RBS and NatWest will allow customers affected by coronavirus to defer payments by up to three months, with TSB offering a repayment holiday of two months.

There is some ambiguity as to how customers have to be ‘affected’ by the virus to benefit from these special measures – payment holidays are being considered on a case-by-case basis.

A spokesperson from RBS and NatWest, said: “We are monitoring the potential impact of coronavirus across all our customers to ensure we can support them appropriately through any period of disruption.

“We understand that there may be circumstances where a personal customer may fall into financial difficulty as a result of the impacts of coronavirus, for instance, loss of income.

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“We will look to understand each customer’s situation on a case-by-case basis and can offer a number of options to help them manage their finances. We would encourage any customer experiencing financial difficulty to get in touch with us.”

Virgin Money will also consider offering relief on a case-by-case basis.

Meanwhile Santander is offering support to customers, which can include deferring or reducing repayments.

A Santander spokeswoman said: “Santander has a team of experts on hand to support customers who have been impacted by the coronavirus. Anyone who has been affected can talk to us on 0800 9 123 123.”

In other measures, Lloyds Banking Group is offering £2bn of new funding to small firms with no fees.

Meanwhile Barclays is contacting business customers affected by the virus, offering them 12-month capital repayment holidays on loans of more than £25,000.

Barclays said in a statement: “Any customers suffering hardship as a result of Covid-19 can contact our specialist support colleagues if they are experiencing problems making repayments to their mortgage, overdraft, personal loans or credit cards.

“These customers can also access their fixed savings accounts early without paying any penalty charges.”

Miles Robinson, head of mortgages at online mortgage broker Trussle, said: “Mortgage lenders don’t live under a rock. They know that coronavirus is causing severe uncertainty.

“They’re also aware that as a result of the outbreak, some customers might be unable to make their monthly mortgage repayments. Following Italy’s nationwide lockdown to contain the spread of the virus, payments on mortgages are to be suspended across the country.

“In the UK, we’ve already seen a number of lenders offering customers payment holidays on their mortgages and other loans if coronavirus means they face difficulties paying because of loss of work.

“Borrowers who are worried about coronavirus and what it might mean for their mortgage should get in touch with their lender as soon as possible to discuss their options.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Lenders are reasonably sympathetic to any illness that affects a borrower’s ability to pay their mortgage, whether it’s coronavirus or something else.

“They may ask for evidence that you are unwell but the message to borrowers, particularly the self-employed who are most likely to be affected in terms of their income, is that anytime you are struggling to pay your mortgage, get in touch with your lender. Don’t bury your head in the sand and hope the problem will go away – it won’t.

“If you find yourself struggling, make a proposal to your lender – you might not be able to afford to pay all your mortgage, for example, but you could offer to pay half. The important thing is to ask for help as early as possible rather than ignoring the issue. While lenders should offer support to borrowers, they can only do that if they know there is a problem.

“Keep a note of any conversations or correspondence you have with the lender about a payment holiday, as if is not marked down correctly and is noted as arrears, there could be an issue when you come to remortgage in two or three years’ time. But if it is marked correctly, it shouldn’t harm your credit rating.

“Lenders aren’t under any obligation to give you a payment holiday and if you are a habitual late payer of your mortgage, they are less likely to be supportive. However, even if you are in this situation you should talk to your lender and see what can be done.”


Source: Property Wire

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Property industry worried about coronavirus

Industry figures are worried public concerns about coronavirus will have an adverse effect on business, after the number of reported cases reached 115 yesterday.

The market has had a busy start to the year, but there are fears the virus will put the breaks on activity.

Jonathan Sealey, Hope Capital’s chief executive, said: “Over the past few months it has felt as though we were experiencing a real sea change in the market as the political arena became less of a focus.

“We have definitely seen the busiest start to any year so far as people started looking forward to a more stable environment.

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“Unfortunately, that may well be up in the air again as nervousness surrounding the COVID-19 outbreak takes hold.”

And Richard Pike, Phoebus Software sales and marketing director, said: “We’ve started the year well but there is one black cloud that is hard to ignore, and it is one that is already having an effect on the world’s economy.

“How the coronavirus effect will translate down the line into the housing market is anyone’s guess, but it is unlikely to have no effect at all.”

One commentator speculated whether the virus fears could push the regulator towards loosening mortgage affordability rules.

Miles Robinson, head of mortgages at online mortgage broker Trussle, said: “While we’re yet to see the impact of uncertainty linked to coronavirus on the housing market, if lending continues to slow – the time might be coming for the regulator to consider a gentle easing of restrictions around affordability.”

Source: Property Wire