Mortgage payment holiday application deadlines have been extended for those who continue to struggle with repayments. The City regulator took the action as reports of a sharp decline in house prices emerged during the Covid-19 pandemic.
The report, conducted by Nationwide, has shown a monthly fall in prices more severe than any from the previous 11 years.
There have also been warnings of an extended lull in the mortgage and housing market, with activity set to remain low. This comes as a blow to the housing sector after optimism was high thanks to house viewing restrictions being lifted in England.
Between April and May of this year, they reported a fall of 1.7% in house prices, which equates to an average value decrease of £4,000. This was the biggest dip since February of 2009.
However, there is still good news for investors.
Overall, despite growth slowing from 3.7%, house prices are still on the rise annually. When looking at the big picture, we can see that there is still a 1.8% increase in value across the year.
The mortgage lender’s report was released as the Financial Conduct Authority (FCA) announced that the deadline for mortgage payment holiday applications had been extended by three months – until 31 October.
Another survey commissioned by Nationwide off the back of this found that there was a feeling of being ‘put off’ from moving as a result of the current climate. The average time that prospective buyers were willing to wait until reentering the market was 6 months, which may give investors an insight into how the market will look towards the back end of 2020 and beyond.
As Nationwide’s report was released to the public, two announcements were made by the Financial Conduct Authority (FCA). These were that mortgage payment holidays were to be extended by 3 months – up until 31 October – and that there is to be a ban on lender repossessions of properties.
These measures will go some way towards quelling customer concerns about repayments as well as allowing those who need to isolate due to Covid, to do so without fear.
Prominent economists, such as Samuel Tombs of Pantheon Macroeconomics, believe that earnings being slashed may also have an effect on house prices. He said:
“The huge size of the blow from COVID-19 to households incomes and the deterioration in consumers’ confidence suggests that house prices must drop. We look for a 5% decline in prices by the end of the third quarter.”
Beyond this though, as people begin to filter back to work, businesses reopen and the economy begins to recover, we may see prices begin not only to level out, but to rise once more.
A final word from one of Quadrin Group’s in-house experts:
“It is also worth noting that unlike the initial payment holiday period, where the lender was obliged to accept a borrower’s request, the FCA is allowing greater flexibility to question the borrower who requests the period be extended about their circumstances and if they deem it not appropriate to provide other options. It is also worth mentioning, that the extension is only in respect of mortgages and the decision in respect of unsecured credit is still to be announced.”