Will Leyland, 25 June 2020
As those within the industry are aware, demand has surged since re-opening following strict lockdown restrictions on estate agents and the property industry.
Pent-up demand, as well as a new perspective on priorities since people have been forced to spend much more time indoors, has prompted a new wave of enquiries from tenants, landlords, buyers and potential sellers who are looking to move home.
Many across the UK have reported their busiest period in years, and many first time buyers will now be considering making the leap towards their first property purchase now that the market is open for business again.
With government help still available in a number of forms, it’s still relatively easy for those with a modest deposit to take their first step on to the ladder, however, this could now be changing as the market responds to the economic shock created by having to lock down the economy for almost three months.
One of the last sectors to re-open, those in the hospitality industry can begin to open (albeit with heavy restrictions in place) from the 4th June, as new infections and death decrease to manageable levels across the country.
With the economy almost back to some sort of relative normality, now appears to be the time when young people can start to see some job security again, and plan for their financial future.
However, Nationwide announced last week that they are discontinuing their 95% mortgages with immediate effect, following economic uncertainty due to the Coronavirus pandemic.
The move means that they have effectively tripled the amount that a first time buyer would be required to provide for their deposit when looking to purchase a property, and this invariably makes life much harder for them. A spokesman said the change was due to “these unprecedented times and an uncertain mortgage market”.
It’s not just Nationwide that appear to be pulling back from the first time buyer market whilst they shore up their finances, Housing Today also reported that the market is beginning to dry up for those looking for a higher Loan-To-Value (LTV) mortgage, mainly first time buyers.
They reported that “Exclusive data shows that there is not a single two-year 95% loan-to-value mortgage available to most UK borrowers”
Further, it said “In addition, there were only 16 products in total available at 95% LTV, down from 391 at the start of March, prior to the onset of the coronavirus pandemic. That equates to a fall of 96%”.
The news will be seen as concerning for those looking to get on to the property ladder this year, with options running very low for those with a moderate deposit.
This, in turn, could create a large influx of demand into the rental market, with millennials now running out of options when it comes to raising a bigger deposit.
There is no expectation that house prices will drop this year, with significant demand still within the buying market and insufficient supply in most areas, but this could well mean that demand for rental properties, with an even smaller supply, could mean a run on available properties.
What this means for buyers who may be hesitant is that it’s probably a good idea to get the wheels moving on your purchase as soon as possible, and for those looking to potentially move in the Private Rented Sector (PRS), it’s probably worth moving sooner rather than later, as higher demand may drive rents up in the short term.
Will Leyland, 25 June 2020