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Things are difficult for buyers and sellers in the property market at the time of writing. Many deals are falling through as COVID-19 disrupts transactions, and the property market, by and large, currently remains frozen. Due to the nationwide lockdown people are unable to attend house viewings, and many sellers are pulling their properties from the market until the situation calms down. Here at Cedar House, as financial advisers and mortgage specialists we’re getting lots of questions from people about what they should do.
Should you take your house off the market if you’re a seller? What if you want to move soon, or if you need to sell in order to help fund care home fees? These are difficult questions and there are no universal answers due to the fluidity of the COVID-19 situation, but also because even in the best of times each person’s financial goals and situation are different.
However, in this short article, our team at Cedar House offers some thoughts and information which you may want to discuss with your financial adviser when weighing your options For more information and bespoke financial advice, please contact our team via:
020 8366 4400 or enquiries@cedarhfs.co.uk
Government advice in May 2020
The advice of the UK government is, of course, subject to change and what follows is accurate at the time of publication. Presently, at the beginning of May 2020, the government has stated that, “as far as possible”, property sales should be delayed. In other words, if contracts are still yet to be exchanged, the official advice is that deals should be postponed. The main exception is if you are looking to move into a vacant property. In this situation, the deal is allowed to go through but bear in mind that it may be difficult to get help from removal workers.
Things get a bit complicated if the contracts have been exchanged. In this case, you are legally obligated to go through with the property sale and purchase. Social distancing rules will need to be strictly observed during this entire process. However, in all likelihood, the purchase will need to be completed later than originally planned. This is likely to involve a complex process where you contact the buyer/seller, the conveyancer and all other relevant parties to establish the best, later date to complete the transaction (i.e. after “stay-at-home” restrictions are eased).
Getting a mortgage
The mortgage market has contracted significantly since the UK lockdown began. By the start of April, over 1,600 mortgage products were withdrawn by banks and building societies, effectively removing any deals offering 90% and 95% mortgages. Some lenders will now only consider mortgage applications where a large deposit is available, thus disproportionately affecting first-time buyers who typically have access to less equity.
There is some good news in early May, however. Virtual valuations are on the rise, encouraging lenders to increase their range of mortgage products. Clydesdale Bank, for instance, has been offering virtual/remote valuations such as these, and Nationwide recently stated it may consider mortgage applications with a 15% deposit.
“I’m struggling to pay care fees; can I still sell my home?”
The freeze in the housing market is extremely frustrating for buyers, sellers and brokers. Yet it takes on another level of seriousness when a frozen transaction potentially threatens a person’s financial security. This comes into sharp focus for those who originally planned to sell a property to fund a relative’s care fees, before the COVID-19 lockdown put a huge spanner in the works.
Here, you need to be very careful. At Cedar House, we’ve heard awful stories of desperate families opting into costly financial schemes offered by fraudulent individuals and companies. Please consider seeking professional financial advice if you find yourself (or someone you know) in this difficult situation. Quite often, there are other options available which do not put your life savings and other assets at risk. For instance, your local council might be able to offer you a “deferred payment agreement” (DPA) which is repaid when your home is eventually sold, or upon your death.
“What will happen to house prices, and does this mean I need to negotiate?”
Some voices in the media and social networks are anticipating an imminent house price crash in the UK, but these predictions should be taken cautiously. Whilst some market commentators (e.g. Savills) have anticipated short-term price falls in the housing market between 5-10%, there is currently no consensus about a crash in the housing market.
At Cedar House, we’d suggest that in the present environment heavily discounted sales are unlikely to be widely available. Many sellers will probably wish to delay parting with their property rather than agreeing to a big cut. Forced sales, which can push house prices down during times of national emergency, is likely to be mitigated by the UK government’s measures which encourage mortgage holidays, and by the Bank of England’s reduction of its base rate to 0.10% (thus lower many homeowner’s monthly payments).
Invitation
If you would like to discuss your financial plan or long-term strategy with a member of our team, then get in touch today to arrange a free consultation:
020 8366 4400 or enquiries@cedarhfs.co.uk.