Home-buying has virtually ground to a halt due to the lockdown – but efforts are already underway to get the market moving again. Remote valuation and viewings, and the return of low-deposit mortgages, are among the encouraging signs. Article by Nick Green.
The UK property market is restarting most of its activities, thanks to a relaxation of the lockdown rules.
Why the property market was paused
When the COVID-19 lockdown began at the end of March, the government effectively put the entire property market on hold, leaving buyers and sellers in limbo.
Big lenders such as Nationwide and HSBC temporarily withdrew their highest loan-to-value products, while putting most other lending on hold, except for those with equity or deposits of at least 40 per cent. Lending for new purchases has effectively stopped for all but the wealthiest buyers, and remortgaging (usually about 45 per cent of the market) is now nearer 80 per cent. However, even homeowners looking to remortgage faced a major problem, which was that property valuations generally require a visit from surveyor – something the government has strongly discouraged during the lockdown.
But just as many businesses are managing to carry on their work remotely, a drive is underway towards more remote ‘desktop valuations’ that don’t require surveyors to be present.
Remote valuations to help remortgagers
Banks are currently reluctant to lend to those who want to borrow more than 60 per cent of their property’s value, without a physical valuation. One of those hoping to overcome this obstacle is residential surveying specialist SDL, which has upgraded its desktop valuation service in response to increasing demand. Desktop valuation allows a surveyor to confirm the value of a property without visiting it, and so provide assurance to the bank that the loan-to-value (LTV) ration is accurate.
It is hoped that this type of service will get the remortgage market moving again. It may also prove a lifeline to those whose mortgage deals are now expiring. If homebuyers are unable to remortgage when their fixed rate deals end, they will move automatically onto their lender’s SVR. Many may be unable to afford the higher repayments, especially in the current crisis. Desktop valuations may prove crucial in preventing a secondary crisis of unaffordable mortgages.
However, there are limits to what can be done via technology. Though valuations can be carried out remotely, property surveys for homebuyers require a personal visit. The majority of surveyors will therefore be adhering to the government’s lockdown policy and staying away, even if the property to be surveyed is empty. Some surveyors however may still be able to carry out urgent work, provided strict distancing policies are followed.
The return of high LTV mortgages
The withdrawal of 75+ per cent mortgages at the start of the lockdown showed how worried lenders were about a property price slump. In a sign that this fear is receding, lenders including Santander, Nationwide and HSBC have unlocked these products again, up to LTVs of 85 to 90 per cent in some instances. HSBC says it is pausing transactions above 90 per cent LTV ‘on a temporary basis’, but is able to rely on desktop valuations for lower LTV remortgaging.
Santander have raised their maximum mortgage from £350,000 to £500,000 with up to 75 per cent LTV. Their two-year fixed rate on these terms is currently 1.44 per cent, and they also offer a five-year fixed rate of 1.59 per cent.
Meanwhile Nationwide’s existing customers can still borrow up to 95 per cent LTV when they remortgage, and is making use of desktop valuation for loans of up to 85 per cent. On the downside, the lender has increased its interest rates by 0.25 per cent on its fixed-rate mortgages over 80 per cent, while its two-year tracker rates are up 0.15 per cent.
David Hollingworth of mortgage broker L&C Mortgages called these signs ‘really encouraging’ and said, ‘This move from Nationwide is an important one in supporting borrowers and advisers with the right products, and sends a clear signal that the mortgage market remains open.’
Though very welcome for remortgagers, the reintroduction of high LTV mortgages may not help new buyers for a while yet. However, their return is still encouraging, as it means that when the lockdown is lifted there should be a much larger pool of first-time buyers eager – and able – to get on the property ladder at last.
Could home sales return under lockdown?
At present there are no indications that the freeze on property transactions will be lifted during the COVID-19 lockdown. Currently the only property transactions still taking place are those that were already at a critical stage when the lockdown was introduced. However, this hasn’t stopped people from seeking workarounds that could allow some form of activity to resume, at least in theory.
One option is remote viewings, whereby a lone estate agent visits a property wearing protective clothing (perhaps while the occupants are out) and conducts a virtual video tour for the prospective buyers, who watch in real time and can ask questions. Alternatively, homeowners themselves can conduct such tours, removing the need for any physical visits. Properties can also be kept live on estate agents’ websites, to generate interest lists.
Virtual viewings may be able to carry the process as far as the offer stage, and some offers may even be accepted. Current restrictions make it unlikely that purchases could progress much further – but even this may change, if lockdown is forced to continue for longer. If not, prospective buyers and sellers can still use this time to make as much progress as possible, so that their chains are ready to roll as soon as lockdown is lifted.
If your deal is coming to an end and you need to remortgage, talk to a mortgage broker who can help you through the process.