The UK government has in effect suspended the country’s property market, stopping estate agents from marketing new homes and banning visits to those already for sale, as it seeks to contain the coronavirus outbreak.
The government’s move on Thursday evening followed calls from banks to freeze the market. In talks between lenders and ministers, banks have expressed concern about the impact of the pandemic on valuations. They are also concerned about granting credit when the economy is in freefall, according to senior bankers.
Contracts
They have told ministers it has become impossible to survey properties, according to people briefed on the discussion. Bank call centres have also been inundated with anxious homeowners requesting mortgage holidays.
The government had already urged buyers and sellers to delay moving unless it was unavoidable for “contractual reasons”.
But on Thursday, it went further, saying no visitors were allowed into properties while the ‘stay-at-home’ measures were in force, including estate agents, surveyors or potential buyers. The edict in effect blocks any new transactions taking place after the current round of pending completions.
“You can speak to estate agents over the phone and they will be able to give you general advice about the local property market and handle certain matters remotely but they will not be able to start actively marketing your home in the usual manner,” the government said on Thursday night.
A number of banks and specialist lenders have already withdrawn new mortgages to focus on existing customers and reduce pressure on call centres that are low on staff.
Mortages
Lloyds Banking Group and Barclays, two of the UK's biggest lenders, are temporarily pulling many of their mortgages. Lloyds has stopped offering mortgages or remortgages through brokers unless the customer has a deposit of at least 40 per cent of the value of the property.
Barclays told brokers it would no longer offer mortgages for customers who did not have a deposit of at least 40 per cent, but it would continue to offer remortgaging deals.
Bankers were keen to point out that the withdrawal of mortgage products did not signal they were running short of financing, as happened in 2008 when funding markets froze.
David Hollingworth, director at broker L & C Mortgages, said lenders were moving to cut the flow of new business as they dealt with tens of thousands of requests for mortgage payment delays.
“The purchase market will effectively go into cold storage,” he said. “You’re just not able to go out and buy a house even if the vendor wanted you to come around.”
Although the government has said some agreed moves could still go ahead, it said the majority should be delayed until movement restrictions were lifted.
Lenders have agreed to extend the time borrowers have to complete a transaction after receiving a mortgage offer, in order to stop transactions that are already in train from failing.
Customers
Mortgage offers are usually valid for at least three months, but customers who have exchanged contracts will now be able to extend their mortgage offer for another three months to enable them to move at a later date.
One banking executive said lenders wanted to provide flexibility but cautioned that “it does present legal challenges - what happens if a seller changes their mind in the next three months?”
Laura Conduit, a property lawyer at Farrers, said: "The strict legal position is if you have exchanged and have a completion date, you must complete on that date. It's going to come down to how nice people are."
She said that banks would have to decide whether their credit teams could rely on valuations using videos of properties rather than surveyors, adding: “We haven’t got a clue what the value of anything is.” – Copyright The Financial Times Limited 2020
