Don’t move: UK housing market freezes as people stay put

Restricted from offering new loans, banks have been busy with people asking for leniency on existing mortgages.

Coronavirus cases rise to 273 in UK
People wear medical masks as a precaution against coronavirus in central London, United Kingdom as the number of cases soars [File: Ilyas Tayfun/Anadolu]

The United Kingdom government has urged people to avoid moving house during the coronavirus outbreak, as the pandemic brings the country’s property market to a near standstill.

In guidance issued late on Thursday, the government said while “there is no need to pull out of transactions, we all need to ensure we are following guidance to stay at home and away from others at all times”.

The outbreak has restricted banks’ ability to offer new mortgages, while many have been swamped with inquiries from people asking for breaks on their existing home loans.

In line with the government’s advice, UK lenders agreed on Thursday to give all homebuyers the option of extending mortgage offers by three months.

UK Finance, the banking industry body, said banks would grant homebuyers who have exchanged contracts the possibility of moving at a later date by extending their mortgage offer for up to three months.

“Lenders recognise that many people looking to move into their new home are facing significant stress and uncertainty due to the impacts of coronavirus,” said UK Finance boss Stephen Jones. “Current social distancing measures mean many house moves will need to be delayed.”

Banks were also urged to help customers “manage their finances as a matter of urgency” as homebuyers may go through financial hardship during the three-month extension because of the spread of the virus.

“It is possible that some borrowers’ financial circumstances may change during the three months. If this happens, or the terms of the purchase change, we will work closely with the borrower to achieve a sensible outcome,” said Robin Fieth, Chief Executive of the Building Societies Association (BSA).

While deterring new buyers, the pandemic is making completing transactions increasingly difficult as it is almost impossible for banks to carry out surveys and get other paperwork done during a nationwide lockdown ordered by Prime Minister Boris Johnson on Monday.

Banks held discussions with the government over the matter on Thursday.

One source with direct knowledge of the discussions said talks between ministers and lenders had focused on offering extensions and flexibility if people could not immediately complete their house purchase, rather than shutting down the market altogether.

“We want the housing market to remain open and people to be transacting,” this source said, adding the priority was to support homebuyers challenged by coronavirus disruption.

Source: Reuters