Mortgage choice improves for the first time in 5 months
First-time buyers have been hit by reduced mortgage availability in the wake of Covid-19, but the latest figures reveal an increase in products for borrowers with small deposits.
The number of mortgages on the market has risen for the first time since June, with choice also increasing for borrowers with small deposits.
A total of 2,404 mortgages are currently available - 145 more than in October, according to financial information group Moneyfacts.
The biggest increase was seen in mortgages for people borrowing 75% and 80% of their home’s value, with these tiers accounting for 63% of the rise.
But there was also a glimmer of hope for borrowers with small deposits who have been hit by the withdrawal of high loan-to-value mortgage products in the wake of the Covid-19 pandemic.
The latest data showed a slight improvement in mortgage availability for people with only a 10% deposit, with 56 different mortgages now on offer, up from 51 in October.
Meanwhile, 35 new mortgages were launched for those with a 15% deposit, bringing the total to 344.
But despite the improvement, the number of different mortgages available is still less than half the level seen in November last year.
Why is this happening?
The coronavirus pandemic and the economic uncertainty created by lockdown restrictions has caused lenders to review the level of risk they were prepared to take on.
Many lenders subsequently streamlined their mortgage ranges and withdrew products for borrowers with small deposits.
Despite the reimposition of lockdowns and other Covid-19 restrictions, the recent buoyancy of the housing market, combined with strong mortgage demand, appears to be tempting lenders to launch new products.
Who does it affect?
The increase in mortgage choice is good news for potential buyers as it follows five consecutive months during which lenders reduced their range.
The growth in the number of mortgages available for people with only small deposits is particularly welcome, as this sector of the market was hardest hit when lenders reviewed their ranges earlier this year.
The majority of mortgages for people borrowing 90% of their home’s value are currently being offered by small building societies, such as Penrith, Scottish, The Cumberland, and Teachers Building Societies, and may be restricted to people living in the local area.
Recently, Accord Mortgages released a series of 90% LTV ‘pulse’ deals, available for two days only, for first-time buyers. It’s latest 90% LTV deal, which ran for nine days, was available to all borrowers. Metro Bank recently relaunched its 90% deal too.
Meanwhile, start-up lender Generation Home has just launched a new-style mortgage that can be applied for by a group of up to six friends or family members.
The idea is that groups of friends who want to live together could buy a property together, or family members could assist a first-time buyer in getting on to the property ladder.
While the income of different people named on the mortgage application will be included in the calculation for how much can be borrowed, the ‘booster’, as they are known, has the choice of either contributing to regular repayments, or just being on standby in case they are needed.
What’s the background?
While mortgage availability increased in November, average mortgage rates also rose for the fourth month running.
The typical cost of a two-year fixed-rate deal edged ahead by 0.05% to 2.43%, while interest on a five-year one rose by 0.08% to 2.7% - both broadly in line with levels seen in March this year.
Meanwhile, the average time a mortgage product is available before lenders withdraw it dropped to just 28 days, the lowest level since August 2018.
This means borrowers will have to move quickly to apply for a mortgage after identifying a suitable product, as they are likely to have only a small window of time before it is withdrawn.
Top three takeaways
- The number of mortgages available has increased for the first time since June
- A total of 2,404 mortgages are now available - 145 more than in October
- The biggest increase was mortgages for people borrowing 75% and 80% of their home’s value.
Rents dropped 5% in London, but the rest of the UK showed 1.7% rental growth in 2020
Rents outside London have grown this year but they’ve dropped in the capital as Covid-19 creates a two-speed market, according to our latest Rental Market Report.
With England now in the grip of a second lockdown and restrictions in place across the rest of the UK, our latest Rental Market Report reveals Covid-19 has led to a two-speed market.
Our report shows that despite challenges caused by the impact of the pandemic in 2020, the wider UK rental market (excluding London) is resilient and has shown 1.7% annual growth in rents.
Average rents in London, however, have fallen by 5.2% over the last 12 months, reaching levels last seen in 2014.
What does the two-speed market mean?
Average UK rents outside London climbed by 0.7% in the three months to September, taking the annual growth rate to 1.7%.
Our report reveals a positive picture across most cities. Belfast and Newcastle both recorded annual rental growth of 3.5%, followed by Bristol at 3.1%. Sheffield and Glasgow followed closely behind.
However, London sits at the other end of the spectrum, with rents falling by 3.2% over the last quarter to September. It’ll take the annual fall to 5.2% by the end of December.
This two-speed market is set to be entrenched during the second lockdown in England which started in early November and is due to lift on 2 December - although an extension hasn’t been ruled out. Scotland has a five-tier restriction system in place and Wales recently emerged from a two-week “firebreak” lockdown.
What is driving rental growth?
A mismatch between tenant demand and the number of rental homes on the market is underpinning rental growth.
While renter appetite to move home has levelled off since early summer when the first lockdown ended, it’s still 20% higher than this time last year.
Stricter lending as a result of the pandemic is forcing many aspiring first-time buyers to put their home-ownership plans on hold and remain in the rental market for longer, supporting overall demand.
With universities remaining open despite the impact of Covid-19, the annual influx of students to college in the autumn will also have boosted rental demand.
Against this backdrop, the number of homes available to rent has been constrained, with investment levels dropping since the 3% stamp duty surcharge was introduced in 2016 for those buying an additional home.
What’s the regional picture like?
The strongest rental growth is in the North East, where annual rental growth is up 3.2% in the year to September.
In the North East, rental demand was 54% higher in the three months to September than the average in previous years, while supply is down 9% compared to the typical levels seen in the same three months over the past three years.
Rental growth is in positive territory in all other UK regions outside London, except Scotland and the West Midlands which have other factors affecting the dynamics of the market.
In Edinburgh, a 1.6% annual fall in rents reflects muted tourism and the shift from short-lets to long-lets, while the Aberdeen market has been affected by the North Sea energy industry.
Manchester and Birmingham have just dipped into negative territory, at -0.1% and -0.5% respectively. There are larger annual rental declines in Coventry (down 2.5%) and Reading (down 1.8%) as some cities are hit by the impact of people working from home.
What about London?
The pandemic has had a major impact on London’s rental market, with rental falls reflecting changing work and commute patterns as well as muted tourism.
Like any housing market, London’s is very localised.
The move towards working from home has particularly hit central London, where rental properties normally used by workers for part of the week are coming back to the market.
On top of this, restricted tourism during the summer and autumn has impacted the short-term rental market, with many landlords now offering long-term rentals instead.
However, rental demand is stronger in outer London boroughs where rentals tend to offer more space for the money and are more likely to come with gardens.
What impact has the first lockdown had?
The first lockdown led many renters, just like buyers, to reassess their home and lifestyle. As a result, rented houses are now being snapped up more quickly than flats in some areas. This suggests, perhaps unsurprisingly, additional space, often with a garden, is becoming more important to home-movers.
This trend is reflected in our data, which reveals that the most popular search terms are:
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gardens
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parking
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garage
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balcony
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pets.
The timeline of renting a property has also shortened. The time it takes to rent a house and a flat in the UK, on average, is 16 days and 18 days respectively. This is down from 20 days last year for both types of property.
What’s the outlook for the months ahead?
The two-speed rental market in the UK is here to stay for the coming months, with restrictions set to exacerbate some of the trends that have emerged from previous lockdowns.
And moving into next year, the supply of rental homes in large cities could catch up with demand, limiting the scope for further rental growth.
However, earnings growth is expected to pick up again in 2021, which could pave the way for rents to increase, especially if office working becomes the norm again.
Head of research here said: "The split in the rental market caused by Covid-19 has now crystallised and we are seeing the two-speed market firmly entrenched.
"For most of the UK, the demand/supply gap is underpinning moderate levels of rental growth. We haven’t seen the exodus of students from cities and, as more people are staying in the rental market given the squeeze on mortgage lending, higher levels of demand will continue to underpin rents.
"At the same time, however, muted earnings growth will start to limit the headroom for rental growth in some markets.”
"The search for additional space, both indoor and outdoor, within the rental sector is also set to continue as the country goes through additional periods of lockdown."
Mortgage approvals soared to a 13-year high in September
The stamp duty holiday is continuing to drive high levels of buyer demand. But with England in lockdown again, will this trend continue?
Mortgage approvals for house purchases soared to a 13-year high in September as the rush to buy a home in time to benefit from the stamp duty holiday continued.
A total of 91,500 mortgages were given the green light in September, the highest level since September 2007.
The numbers edged well above August’s tally of 84,700 approvals.
The stampede to buy homes is being driven by a combination of the government’s stamp duty holiday and people reassessing their housing needs following the first coronavirus lockdown.
The high level of demand is reflected in our latest house price index, which found that the pipeline for sales was 53% bigger in October than during the same month last year.
Why is this happening?
September is traditionally a busy month as the property market enjoys an autumn bounce, but in 2020 it has shown higher activity than usual.
The strong level of pipeline sales in part reflects demand that built up during the first national lockdown continuing to work its way through the system, while activity is also being driven by the stamp duty holiday on homes costing up to £500,000.
In addition, the pandemic has caused people to reassess their housing needs, particularly with the threat of further lockdowns looming, creates additional demand.
Who does it affect?
With the stamp duty holiday due to end on March 31, buyers who want to take advantage of it need to start house hunting straight away.
It typically takes around 100 days from an offer being accepted to a transaction being legally completed.
But the current high volume of sales going through is expected to create delays in the conveyancing process, while national lockdowns such as the ones currently imposed on England and Wales could slow things down further.
We estimate that only 54% of sales agreed in January will have completed by the end of March, compared with 92% of those agreed in November.
At the same time, the number of mortgage products available has halved during the past year, with just a handful of deals remaining for people with a 5% deposit and only around 50 for those with a 10% one, according to Moneyfacts.
It is not only those borrowing a high proportion of the value of their homes that are being hit, with mortgage choice falling in all but two loan-to-value brackets, including the 60% one.
There are also reports of a rise in applications being rejected, particularly for first-time buyers, as lenders become more risk-averse.
Finally, the high levels of demand mean buyers face increased competition for homes that are on the market, with many people chasing properties with the same features, such as large gardens.
What’s the background?
Going forward, buyer appetite in some areas is expected to begin to slow down as the recession and rising unemployment take their toll.
Richard Donnell, our research and insight director, said: “The strength of the market nationally is masking weakness in parts of the market where sales are slowing in areas where households are typically on lower incomes and more sensitive to economic uncertainty and more restricted credit availability.
“This market polarisation is set to become a growing feature of the market as we move in 2021.”
Top three takeaways
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Mortgage approvals for house purchase soared to a 13-year high in September as the rush to buy a home continued
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A total of 91,500 mortgages got the green light during the month, the highest level since September 2007
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The stampede to buy homes is being driven by a combination of the government’s stamp duty holiday and people reassessing their housing needs following coronavirus lockdowns.
Lockdown 2: what does it mean for the property market?
A second national lockdown is upon us. With the government making it clear that the housing market is open for business, we explain what the restrictions mean for you.
Prime minister Boris Johnson has won parliamentary approval for a second lockdown in England.
From Thursday 5 November until at least Wednesday 2 December, England is under tough new coronavirus restrictions, with many similarities to the lockdown imposed in March.
Lockdown 2, as it has been dubbed, will last for four weeks but ministers have refused to rule out an extension if the rate of infection doesn’t come down.
However, housing secretary Robert Jenrick has stressed that the property market can continue to operate while following Covid safety guidance.
You are allowed to do the following:
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Visit estate or letting agents, developer sales offices or show homes
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View homes to buy or rent
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Prepare a home to move into
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Move home
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Visit a home to prepare it for sale or rent.
What does lockdown 2 mean for the property market?
Although more of us will be working from home and movement is restricted, the English housing market is still open for business.
Gráinne Gilmore, our head of research, explains: “This lockdown is different from that of earlier in the year. Robert Jenrick, the housing secretary, made this clear within hours of Saturday's announcement, when he said that the housing market will ‘remain open’ during lockdown, so home moves can continue.
“Most agents are well prepared to continue to work remotely should they need to, given the experience between March and May. Likewise, conveyancers and mortgage lenders will be able to shift back to home working quite smoothly, so hopefully sales progression will continue.”
Lockdown 2 and the property market - your questions answered
1. Can I move house during lockdown?
Yes.
Home removals, van hire and other services related to moving house will still operate during lockdown.
However, home-movers and sellers are expected to follow social distancing guidelines and to follow best practices as closely as possible to ensure moving home is as Covid-19 secure as possible.
This includes wearing masks and gloves and having as few people inside a property as possible at any time.
If one of those involved with a home move becomes ill with Covid-19 during the moving process or has to self-isolate, then all parties must be contacted and the move postponed until it can be safely carried out and those who were ill have recovered.
2. Are estate agents open?
The advice from the government is that estate agents are allowed to stay open at branch level.
This means you can still visit your local estate agent during lockdown, but you must follow Covid-secure guidelines such as wearing a mask and sanitising your hands.
While the majority of agents are likely to stay open, and viewings and other services continue to operate as normal, some agencies have chosen to ask staff to work from home. In such cases, estate agents can be contacted over the phone or via their website or email.
Agents also have ways to support much of the sales process virtually with many agents now offering virtual viewings and tours as a first step. Additionally, for homeowners considering selling agents have tools to start the valuation process digitally as well.
Mark Hayward, chief executive, NAEA Propertymark said: “It is vital that agents continue taking all necessary steps to reduce the spread of coronavirus, working in accordance with government and Propertymark guidelines, so the market can continue moving for the entirety of the second lockdown period.”
3. Can I still go view properties in person?
Yes, you can still view potential homes in person.
The new rules state that you can visit estate and letting agents, developer sales offices, show homes and go on viewings during this second lockdown.
However, your estate agent may arrange for your initial viewing to be conducted virtually, with only subsequent visits happening in person.
During in-person home viewings, all parties (that means homeowners, prospective buyers and estate agents) must follow Covid-19 safety guidelines.
A socially distanced viewing essentially means as few people should be in the property as possible (perhaps the owners would like to go out for their daily exercise?) and estate agents may not enter the property with prospective buyers.
The number of prospective buyers allowed to enter the property may also be limited.
Anyone entering the property should wear a mask, sanitize their hands and efforts should be made before and after viewings to wipe down door handles and other common areas.
Find out more in our guide to socially distanced viewings.
Either way, you can still arrange virtual viewings of any property you are interested in by contacting the selling agents.
4. How do virtual property viewings work?
The types of virtual viewing available vary between different estate agents.
Some use 3D cameras that enable house-hunters to take a self-guided tour around a property on their PC or smartphone - from standing at the kitchen sink and looking out of the window, to measuring the size of wardrobes in the bedroom.
In other cases, especially if a property is unoccupied, agents may take their own videos as they walk around it or during a video call with the home-hunters.
Some agents also offer virtual appointments where they talk potential buyers through a virtual viewing as they would if they were at the property in person.
Read more about virtual viewings.
5. Can I put my house on the market during lockdown?
Yes, you can.
The new rules allow people to visit a property to get it ready for sale or rent.
It means that securing a valuation from an estate agent, having photographs taken for marketing purposes, drawing up floorplans and Energy Performance Certificates can all take place.
And there’s no reason for your home not to be advertised on the agent’s website and property portals.
6. Can my friends or family help me move?
Unless you live together as part of the same household, the answer is no- except in circumstances where it is “absolutely necessary”.
Friends and family who don’t live together cannot mix indoors or outdoors under the new guidelines unless one of you is a single person household and you have formed a support bubble.
If you are reliant on friends or family to move, you should work with your conveyancer and estate agency to try and move the completion or rental move-in date to a time after the lockdown has lifted.
The government guidance states: “People outside your household or support bubble should not help with moving house unless absolutely necessary.”
7. Can I use moving services?
Removal firms are expected to honour existing commitments where the home move can be done safely and the date cannot be changed.
They will follow social distancing guidelines and expect the same consideration from home-movers.
8. Will conveyancing continue during lockdown?
Conveyancers will continue to support the sale of properties during lockdown.
They will also help sellers and buyers wishing to change their completion and moving dates until after lockdown.
9. What happens if I’m due to exchange and/or complete during lockdown?
During the lockdown earlier this year, government advice stated that if you could not push back the timings of your home move, then it could go ahead. It added that efforts should be made (with the help of your conveyancer, estate agent and any other members of the property chain) to undertake completion after lockdown if possible.
The government has confirmed that exchange and completions can go ahead during the second lockdown period.
10. What happens if I’m struggling to pay my mortgage?
With incomes threatened by another lockdown, it’s understandable that people may start to struggle to pay their mortgages.
During the last lockdown banks and the government worked together to support homeowners in difficulties, for example by offering mortgage payment holidays.
The government’s mortgage holiday scheme for homeowners and landlords affected by the coronavirus pandemic has now been extended. More details below.
11. Will there be a new mortgage payment holiday to help during lockdown?
Yes.
Following the announcement about lockdown two, mortgage payment holidays are being extended for homeowners adversely financially affected by the pandemic.
Borrowers in England who have not yet had a mortgage payment holiday can request a halt on mortgage payments from their bank for up to six months.
Those who have already deferred payments can extend their mortgage holiday until they reach the six-month limit.
A mortgage payment holiday means repayments are deferred for a specific period, for example three months. During this time, a homeowner will not have to pay anything, but interest will continue to accrue and will be added to the total amount that is owed.
By October 2020, industry figures showed that 162,000 mortgage payment deferrals were in place, down from a peak of 1.8m in June.
Use the mortgage payment holiday calculator below, powered by mortgageholiday.co.uk, to see how your monthly payments may be affected by a holiday, and to find out how to apply:
12. What happens if I’m struggling to pay my rent?
One in four private renters said they were worried about how they will pay their rent as a result of the pandemic - and that was before the latest restrictions were introduced
It is important to talk to your landlord as soon as possible if you're struggling to pay your rent.
If you can still afford to pay some of your rent, ask your landlord if they would accept a reduced payment for a period of time, particularly if you think you will be able to make up the shortfall once your finances have recovered.
As part of new national lockdown measures, the government has announced that the furlough scheme that had been due to end on 31 October will be extended until 2 December.
It would also be worth checking to see if there are any government benefits available to you.
If you already claim Universal Credit or housing benefit, you may be able to get discretionary housing payment through your local council. This is a system that allows rent benefit payments to be paid directly to landlords.
13. I’m a tenant. Can l be evicted during lockdown?
In response to the first lockdown, the government introduced a blanket eviction ban to protect tenants who fell into rental arrears during the pandemic.
While it’s not yet clear if another national eviction ban will come into effect, the government has already asked bailiffs not to evict tenants living in regions of England which currently come under tier three (very high alert) coronavirus restrictions.
Currently, landlords must give tenants at least six months notice of eviction except in cases where tenants have breached antisocial behaviour or multi-occupancy rules.
It’s always a good idea to know your rights as a renter, read our guide on rental rights for more information.
14. I’m a landlord. Can I evict tenants during lockdown?
During the March lockdown the government introduced a blanket evictions ban for all landlords and tenants.
It’s not yet clear whether the same rules will be in place during the new national lockdown.
It’s likely that courts in England will still sit during the lockdown and will prioritise eviction cases involving anti-social behaviour, crime and extreme rental arrears.
The government recently reached an agreement with bailiffs that tenants living under the highest-tiered coronavirus measures would not be evicted while those restrictions are in place.
While the eviction ban imposed during the first lockdown lifted in September, bailiffs have agreed not to evict tenants living under tier two or three restrictions.
Currently, only the most serious circumstances (such as evidence of domestic violence, or antisocial behaviour) enable landlords to evict tenants without giving six months’ notice.
In October the government also announced a Christmas grace period for evictions, meaning that no tenants can be evicted between 11 December 2020 and 11 January 2021.
15. Will the stamp duty holiday be extended?
The stamp duty holiday announced by Chancellor Rishi Sunak in July - in a bid to reinvigorate the property market following the first lockdown - is due to expire on 31 March 2021.
Some people are questioning whether it will be extended to give people more time to take advantage of the tax break which will save the average buyer around £4,500.
Gráinne Gilmore explains: “There is likely to be increased demand for an extension to the stamp duty holiday deadline so potential buyers do not lose out because of this second lockdown.”
While no-one knows whether an extension will be granted by Mr Sunak, you can check out our latest guide on how to beat the stamp duty holiday deadline.
16. Will Help to Buy be extended?
The government has ruled out an extension to the Help to Buy scheme.
The initiative enables people to purchase a new build property with just a 5% deposit, which the government tops up with a 20% five-year interest-free equity loan.
However, the Help to Buy equity loan can only be used for new-build properties bought before 31 March 2021 - a date that was pushed back by the government in July this year.
Despite calls for a further extension, the housing minister Christopher Pincher ruled out any further deadline changes.
“The government recognises that there have been delays caused by Covid-19," Pincher said. "That is why on 31 July a two-month extension was announced to the building completion deadline from 31 December 2020 to 28 February 2021.
“The legal completion deadline for the purchase remains 31 March 2021. The government also announced an extra measure to protect existing customers who have experienced severe delays as a result of coronavirus.
“Homes England, who administer Help to Buy, will work with those who had a reservation in place before 30 June to assess their situation and look to provide an extension where necessary. In which case, they will have until 31 May 2021 to legally complete.
“We believe these measures provide sufficient time for developers to build out homes delayed by Covid-19 and protect customers whose purchases have been significantly delayed."
The government is relaunching the scheme but only for first-time buyers in a slightly different form next year.
17. Can building work continue during lockdown?
Yes.
The government guidance confirms that home repairs and maintenance can continue.
This means tradespeople such as builders, plumbers, electricians, roofers and other services can enter your home to perform work scheduled during lockdown or to respond to any emergency work that arises, such as a water leak or boiler problem.
The government has published guidance on working in other people’s homes safely, and how to mitigate the risks. This includes social distancing, limiting numbers, and wearing personal protective equipment such as masks.
House building can continue to take place in line with public health guidance. Construction and other site workers can go to work, but that care should be taken to respect social distancing in the workplace.
The Federation of Master Builders has also published guidance for workers here.
18. Are garden centres and open during lockdown?
Yes.
Garden centres are exempt from closure as essential retail services.
You can buy tools, plants or seeds and other items from your local garden centre.
This is different from the last lockdown, which saw garden centre closures. They were among the first shops to re-open during the first lockdown.
All non-essential retailers, such as clothing shops, and all hospitality businesses will be closed until 2 December.
19. Are DIY shops open during lockdown?
Yes.
Hardware stores such as B&Q and Homebase will remain open during the second lockdown period.
20. What does lockdown 2 mean for house prices?
Following the first 2020 lockdown, the property market bounced back remarkably quickly, with a combination of pent up demand and the stamp duty holiday fuelling rising house prices.
It also led many of us to re-evaluate the homes we live in and whether they meet our needs.
This has led to a buying surge in many rural regions, with homehunters’ priorities shifting towards homes with gardens, and the rise of home working leading to a demand for home offices.
It’s too early to say what will happen to the market in December and beyond.
Lockdown 2: mortgage payment holidays to be extended for up to six months
Homeowners impacted by the coronavirus lockdown can now extend their mortgage payment holiday. Find out more here.
The mortgage payment holiday scheme will be extended for up to six months following the news that England will go back into national lockdown from 5 November until 2 December.
The scheme had been due to come to an end on Saturday 31 October, but as a result of the new measures designed to contain the Covid-19 pandemic, borrowers who have not yet had a mortgage holiday can request a pause in repayments from their lender that can last up to six months.
The Financial Conduct Authority (FCA) has asked mortgage lenders extend the availability of payment deferrals to support borrowers who are experiencing payment difficulties because of coronavirus so that:
- those who have not yet had a payment deferral will be eligible for two payment deferrals of up to six months in total
- those who currently have an initial payment deferral, will be eligible for another payment deferral of up to three months
- those who have resumed repayments after an initial payment deferral will be eligible for another payment deferral of up to three months
This means homeowners who have had their payments deferred already can extend their mortgage holiday for a further three months until they reach the six-month limit.
Some borrowers will not be eligible for the extension because they have already had two mortgage payment deferrals up to the six-month limit.
In such cases, the FCA has said borrowers who have already taken the full payment holiday but need further help should speak to their lenders to agree an alternative form of “tailored support”.
The FCA is also proposing that no one will have their home repossessed without their agreement until after 31 January 2021.
What's the background?
A mortgage payment holiday means repayments are deferred for a specific period and during this time, a homeowner will not have to pay anything, but interest will continue to accrue and will be added to the total amount that is owed.
The mortgage holiday scheme was first implemented following the April lockdown and by October 2020, industry figures showed that 162,000 mortgage payment deferrals were in place, down from a peak of 1.8m in June.
Lenders will work with borrowers who are struggling to meet their repayments to find the best solution for them.
This includes extending the payment holiday, agreeing to reduced payments, switching them to an interest-only mortgage and extending the mortgage term.
How does a mortgage payment holiday work?
Customers whose finances have been impacted by coronavirus are allowed to take time off making mortgage repayments.
The original payment holiday was announced on 17 March and lasted for three months, but the term has now been extended to cover the latest lockdown measures in England.
Because mortgage payments are only deferred, the interest that would have been paid is added to the outstanding debt owed.
This means the missed payments will need to be made up at some point in the future.
What other options are available?
Lenders have agreed to work with borrowers to find the best solution for them.
This may be a payment holiday, or they may look at other options that could better suit their circumstances.
For example, they may agree to accept reduced payments for a period of time, switch them to an interest-only mortgage, or extend their mortgage term. This would also lead to reduced monthly repayments.
But despite this flexibility, UK Finance has urged people who can afford to keep up with or resume their mortgage payments to do so.
How do I apply for a payment holiday?
If you want to apply for a mortgage holiday, go to your lender’s website and follow the link on coronavirus.
Many lenders have set up an online application process after being inundated with requests in the early days of the scheme.
If you want to take a different option, such as switching to an interest-only mortgage, you should contact your lender directly.
Use the mortgage payment holiday calculator below, powered by mortgageholiday.co.uk, to see how your monthly payments may be affected by a holiday, and to find out how to apply:
Whether you apply online or by telephone, you will need your mortgage details to hand, including your account number.
But you will not need to prove that your finances have been impacted, as lenders are allowing people to self-certify this.
Do not cancel your direct debit before the payment holiday has been agreed, as this would be classed as a missed payment and could impact your credit history.
Can anyone apply for a payment holiday?
A payment holiday is only available if you are not in mortgage arrears and have suffered only a temporary drop in your income, rather than a long-term reduction in your earnings.
If you face longer-term financial issues, an alternative solution may be more appropriate for you.
Either way, contact your lender and discuss it with them.
Will it impact my credit score?
Getting into mortgage arrears would normally have a negative impact on your credit score. But in light of the current exceptional circumstances, UK Finance has said lenders will make sure that borrowers’ credit scores are not affected.
As a result, if you are struggling to meet repayments it is important that you get in touch with your lender and agree to a formal payment holiday.
Number of new homes built jumped 50% in third quarter
The industry started to return to pre-lockdown output by September, but the number of completed homes is still down on last year as we enter lockdown two.
The number of new homes being completed jumped by nearly 50% in the third quarter of this year as the construction industry began its recovery following the first coronavirus lockdown.
Nearly 30,000 new properties were finished during the three months to September, up from just over 20,000 in the previous quarter, according to NHBC, which provides insurance warranties for new homes.
While the increase in homes being built was encouraging in the third quarter, the total for 2020 is still the second-lowest rate of new build completions since 2012 when the sector was reeling from the financial crisis.
The current total of new properties completed so far this year stood at 83,359 at the end of September, which is 30% lower than for the same period of 2019.
Steve Wood, chief executive of NHBC, said: “The Covid-19 pandemic delivered a sharp shock to the housing market in the second quarter of 2020.
“It is encouraging that by early summer house builders had established Covid-secure operating practices and had moved closer to pre-lockdown productivity levels by the third quarter.”
England is due to enter a second national lockdown this week, but the secretary of state for housing, Robert Jenrick, has stressed that the property industry is still open and “construction sites can and should continue” to operate Covid-securely.
Why is this happening?
The housebuilding industry was hit hard by the first coronavirus lockdown, which led to work on construction sites being suspended.
Building has since been allowed to resume, following the introduction of new measures to keep workers safe from the virus.
Even so, output levels would have to double in the final quarter for the total number of homes completed this year to be on a par with 2019.
Who does it affect?
With demand for new build homes currently high, the lower level of completed builds will be disappointing for many potential buyers.
But the issue is particularly worrying for people who are hoping to use the government’s Help to Buy scheme.
The initiative enables people to purchase a new build property with just a 5% deposit, which the government tops up with a 20% five-year interest-free equity loan.
But the scheme in its current form is due to end on 31 March 2021, after which it will only be available to first-time buyers.
The government has extended the deadline by which properties must be finished in order for them to qualify for the existing version of the scheme to 28 February 2021, with the date for legal competition remaining unchanged at 31 March 2021.
What’s the background?
Out of the nearly 30,000 homes finished during the third quarter, 18,319 were for private sale, with the rest either affordable homes or ‘build to rent’ properties.
Building levels were highest in the South East, with a total of 4,072 properties finished in the region in the three months to the end of June, followed by the East at 3,228 and the North West at 3,631.
At the other end of the scale, only 798 homes reached competition in Northern Ireland and just 864 in Wales.
The types of properties being constructed were fairly evenly split between detached homes, semi-detached houses and apartments, all at around the 8,400 mark, with 3,751 terraced properties and 465 bungalows also built.
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Top three takeaways
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The number of new homes being built jumped by nearly 50% in the third quarter as the construction industry recovered from coronavirus lockdowns
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A total of 29,587 new properties were finished during the three months to the end of June, up from 20,102 in the previous quarter
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At 83,359, the number of new properties completed for the year to date is 30% lower than for the same period of 2019.
Three-tier lockdown: what do the new coronavirus measures mean for the property market?
We explain the government's rating system and what it means if you’re trying to buy or sell a home this winter.
Parts of England have been plunged back into lockdown after Prime Minister Boris Johnson announced new measures to help combat the coronavirus pandemic.
The government is adopting a simplified three-tier system, under which restrictions will apply on a local basis according to the severity of Covid-19 outbreaks.
The move comes as the property market enjoys a strong rebound with solid price growth as buyer demand, which built up during lockdown, continues to work its way through the system.
Under the government’s new advice, estate agents remain open and physical property viewings are still allowed across England, with a strict bookings process in place and comprehensive advice on how to follow social distancing guidelines inside properties.
However, the rules are different in Wales where a nationwide lockdown is being introduced from Friday, which will effectively shut the property market for two weeks (more on which, below).
While the latest lockdown measures may make viewing properties more difficult in some areas of England, they are unlikely to dent the current high level of interest from potential buyers.
Richard Donnell, our head of research and insights, said: “We’ve already seen how lockdown led to people carrying out a once-in-a-lifetime re-evaluation of their homes and lifestyles, with a focus on prioritising space. And the latest restrictions will continue to support this trend – particularly for those who are more financially secure.”
Meanwhile, the stamp duty holiday is continuing to act as an incentive for buyers to complete a purchase before it comes to an end on 31 March 2021.
As a result, if you want to sell your home, the current measures are unlikely to deter potential buyers.
The governments in England and Scotland are encouraging the use of virtual viewings before visiting properties in person in order to minimise public health risks, and socially distant viewings will continue to be the norm.
However, as of this weekend it will not be possible to view properties in Wales for the duration of a two-week "firebreak lockdown".
What the different tiers mean:
Tier 1 - medium alert
In tier one areas all businesses and venues can continue to operate in a Covid-secure way, other than those that are currently closed by law, such as nightclubs.
Schools, universities and places of worship can remain open, and indoor sport and exercise classes can continue to take place. People must not meet in groups of more than six either indoors or outdoors.
Property viewings can continue to take place as long as anti-coronavirus measures are taken and there are no more than six people in the property at one time.
Such measures include the wearing of face coverings, regular hand washing, keeping doors and windows open for good ventilation during the viewing, and only two prospective buyers from the same household entering the property at a time.
Open house viewings are not allowed at this time.
If any member of either the household being viewed, or the household viewing, shows symptoms of Covid-19 or is self-isolating, then an in-person viewing should be delayed.
Most areas of England currently fall into this tier.
Tier 2 – high alert
Anyone living in a tier two area must follow all of the tier one rules, and also not meet with anybody outside of their household or support bubble in any indoor setting, including their home or a public place.
However, the current government advice states that in-person property viewings can still take place, with appropriate precautions. For the latest government advice in full check here.
Nevertheless, the ban on meeting people outside of your household or support bubble indoors means that some buyers or sellers may decide to suspend property viewings or only undertake them virtually.
Areas that fall into this tier currently include parts of Cheshire, Warrington, West Yorkshire, South Yorkshire, the North East, Tees Valley, West Midlands, Leicester and Nottingham.
London, Essex, Elmbridge, Barrow in Furness, York, North East Derbyshire, Chesterfield and Erewash are the latest regions to be placed in tier two.
Coventry will move into tier two from midnight on the 23 October.
Tier 3 – very high alert
Tier three is reserved for areas where transmission rates of Covid-19 are causing the greatest concern.
People living in these areas are not allowed to meet anybody outside of their household or support bubble in an indoor or outdoor setting, apart from open public spaces such as parks and beaches, where the rule of six will still apply.
People are also advised not to travel in and out of these areas, other than for work, education, accessing youth services or caring responsibilities.
Restrictions in this tier are likely to have the biggest impact on the property market.
Although government guidelines don’t currently state that in-person viewings are banned in tier three regions, it can be assumed that in many cases estate agents, sellers and buyers will decide against going to see properties while restrictions are in place, unless they have no other option.
That said, renewed lockdown measures may also heighten people’s desire to move if they are unhappy with their current accommodation.
In England, tier three currently applies to Liverpool and the surrounding area, where the housing market is currently on a strong footing with price growth driven by rising demand of 3.4% recorded in the year to the end of September.
Lancashire was the second region to be placed in tier three.
Greater Manchester has now had tier-three restrictions imposed upon it despite an agreement failing to be reached between local government leaders and Westminster. Restrictions will come into force on Thursday 22 of October.
South Yorkshire will move into tier three from Saturday 24 October. The area is comprised of Barnsley, Doncaster, Rotherham and Sheffield.
Other areas currently in discussion with the government about entering tier three include West Yorkshire, Nottingham, the North East and Teesside, but no agreements have yet been reached.
What about Scotland and Wales?
Scotland introduced a raft of short-term new anti-coronavirus measures which started on 9 October and will run until 26 October.
They include not meeting people outside of your extended household in their home or inviting them to yours, and not gathering in groups larger than six people or from more than two households outdoors.
Indoor pubs and restaurants can only be open between 6am and 6pm and they cannot service alcohol, although outdoor ones can stay open until 10pm and can serve alcohol.
The rules apply to the whole of Scotland, with some additional measures also put in place across the central belt.
The Scottish government’s guidance on property viewings emphasises a virtual-first approach. This means in-person property viewings are permitted, but it is recommended that you view properties virtually in the first instance if possible and only proceed to a physical viewing if you are interested in offering on the property.
First minister Nicola Sturgeon this week announced a new five-tier system would come into force in Scotland on 2 November. The tiers two to four will largely match the English system, with tier one for lower risk areas and tier five imposing even tougher restrictions.
The Welsh government is introducing a nationwide "firebreak lockdown" from the end of this week. This means that a series of restrictive measures will be in place from 6pm Friday 23 October until the start of Monday 9 November 2020- and this includes the closure of estate agencies for this two-week period.
Property viewings are not permitted during this period. However, if you are moving home and cannot change the date of moving, then removals and other services required for moving home are permitted, but should be avoided if possible.
Up until the latest national lockdown, advice from the Welsh government has been that in-person viewings can still take place, also with an emphasis on virtual viewings in the first instance and strict guidelines for conducting viewings Covid-securely.
What do the new measures mean for estate agents?
Mark Hayward, chief executive, NAEA Propertymark comments: “The new three tier Covid restriction approach has not changed the guidance for estate agents.
Mortgage availability drops to 10-year low as Covid-19 makes lenders cautious
The number of home loans on offer has halved as banks tighten their lending criteria in the wake of the coronavirus pandemic.
The number of mortgages available for buyers to choose from has fallen to the lowest level since 2010.
A total of 2,259 mortgages are now available – that’s less than half the number that was on offer in October last year, according to Moneyfacts.
Average interest rates on mortgages have also risen for the third month running, although the typical cost of a two-year and five-year fixed rate deal is still lower than it was in March.
Meanwhile, the Bank of England’s Credit Conditions Survey showed that banks and building societies had tightened their lending criteria for mortgages between July and September, with further tightening expected in the next three months.
Why is this happening?
The coronavirus pandemic along with its associated lockdowns and job losses has made lenders more cautious.
They are also bracing themselves for a rise in repayment arrears in the coming months as mortgage payment holidays come to an end.
Banks and building societies have reviewed and streamlined their mortgage ranges, as well as become pickier about who they lend to.
At the same time, they are taking the opportunity to increase their margins - the difference between the rate they borrow money at and the rate they charge customers – to make mortgages more profitable.
Who does it affect?
First-time buyers have been particularly hard-hit by lenders reassessing their mortgage ranges, with many deals for borrowers with small deposits having been pulled from the market.
In October, the number of mortgages for buyers with a 5% deposit fell to just 12, compared with 391 in March.
Meanwhile, there are now 51 mortgages for people with a 10% deposit - down from 779 seven months ago.
But lenders are not just pulling loans for buyers borrowing a high proportion of their home’s value.
The number of different deals available has fallen in all but two loan-to-value (LTV) brackets, including the 60% one, which is usually the tier lenders reserve their most competitive rates for.
What’s the background?
Despite tightening their lending criteria, banks and building societies are still very much open for business, as evidenced by the number of mortgages approved for house purchase reaching a 13-year high in August.
In fact, the Bank of England survey showed that although there is now less product choice, lenders actually increased the funds they had available for mortgage lending during the third quarter and they do not plan to restrict lending levels in the final part of the year.
But despite banks and building societies typically launching their most competitive deals between October and December, as they look to meet their annual lending targets, this year they expect to further increase the interest rates they charge on mortgages.
Top three takeaways
- Mortgage availability has dropped to the lowest level since 2010
- The number of mortgages available is also less than half the number that was on offer a year ago
- Lenders have tightened their credit criteria – and further tightening is expected in the coming three month.
Nearly a third of landlords plan to sell properties in the coming year
The coronavirus pandemic has hit the buy-to-let sector hard, leading to an estimated £437m in rent arrears.
Twice as many landlords are planning to sell properties as those who are looking to expand their portfolios over the coming year, following a steep rise in rent arrears caused by the coronavirus pandemic.
Three out of 10 private sector landlords plan to sell one or more properties, compared with 16% who expect to buy at least one more in the next 12 months.
This is despite the fact that 35% of buy-to-let investors said they had seen increased tenant demand during the past three months, according to the National Residential Landlords Association (NRLA).
Unsurprisingly, nearly two-thirds of landlords said their businesses had been negatively impacted by Covid-19, with 18% saying the pandemic had had a significant negative impact on it.
Why is this happening?
The pandemic, lockdown and the resulting negative impact on jobs and earnings has led to a steep increase in the number of tenants who have fallen behind on their rental payments.
The NRLA estimates that private sector rent arrears in England as a result of coronavirus stand at £437m.
This increase in rent arrears, combined with rising costs as a result of regulatory and tax changes, has made the sector less profitable, leading many landlords to review their portfolios and sell properties.
Who does it affect?
The fact that nearly a third of landlords are planning to sell properties is bad news for tenants in the private rental sector.
There is already a mismatch between supply and demand, and a further reduction in the number of properties available to let is likely to drive rents higher.
What’s the background?
Landlords are calling on the government to help tenants in England who have fallen behind with their rent.
Suggestions include offering interest-free or low-cost hardship loans to cover arrears, similar to those available in Wales and Scotland.
Currently, if landlords are struggling to pay mortgages because their tenants are in financial difficulties, they can apply for a mortgage payment holiday of up to three months, with the interest they would have paid added to their outstanding debt.
Landlords are advised to try to work with their tenants to establish an affordable repayment plan for any rental arrears once the tenant’s finances have improved.
Landlords are also advised to ask their tenants if there are any benefits they may be entitled to that they are not currently claiming. For example, Universal Credit and Housing Benefit have been increased since the start of the pandemic to cover at least 30% of market rents in the claimant’s local area.
The ban on tenant evictions has also now been lifted, although landlords still have to give tenants six months’ notice in the majority of cases.
Top three takeaways
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Three out of 10 private sector landlords said they planned to sell one or more properties during the coming year, compared with 16% who expect to buy one
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The selloff comes despite 35% of landlords seeing increased tenant demand during the past three months
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Nearly two-thirds of landlords said their business had been negatively impacted by the coronavirus pandemic, with 18% saying it had had a significant negative impact on it.
Bank of England eyes negative interest rates: what it could mean for you
The Bank of England has written to UK banks asking them to prepare for zero or negative interest rates. We look at what this might mean for borrowers.
As the Bank of England explores the possibility of introducing negative interest rates, we take a look at the impact such a move would have on people taking out mortgages.
What’s happening?
The Bank of England’s Monetary Policy Committee is exploring how negative interest rates could be implemented.
Such a move would mean entering a ‘topsy-turvy’ world in which institutions are charged for depositing cash with the Bank instead of being paid interest on it.
The Bank has recently written to the UK’s banks asking them what steps they would need to take to be ready for the introduction of negative interest rates.
Despite this flurry of activity, the Bank has been at pains to stress that it is currently only considering negative interest rates as part of its “policy toolkit”.
It is expected to put in place other measures to support the economy before taking the drastic step of introducing negative interest rates.
Even so, markets have priced in a possible move to negative rates in the spring of next year.
What does this actually mean?
Negative interest rates mean that instead of the Bank paying commercial banks interest on the money they deposit with it, it would instead charge them money.
So, for the sake of argument, if the base rate was cut from its current level of 0.1% to -0.1%, instead of earning interest of 0.1% on their deposits, commercial banks would be charged interest of 0.1% by the Bank.
Such a move would potentially impact consumers as high street banks base the interest they pay on savings accounts and charge on certain mortgages on the Bank’s base rate.
Why is the Bank of England considering taking rates below zero?
The theory is that charging banks to deposit money encourages them to lend money to businesses and consumers, rather than hold it in reserve.
The easier and cheaper it is for businesses to borrow money, the more likely they are to do so.
The way they spend this money, such as investing in new machinery or expanding their businesses, helps to boost the economy and support employment.
What impact could it have on consumers?
While negative interest rates will have an impact on borrowing costs, it is highly unlikely that customers will be paid by their bank to borrow money.
People with fixed rate mortgages will not see any impact on their monthly repayments, as these are set for the term of the mortgage.
Those with tracker deals, which move up and down in line with the Bank’s base rate, could see a drop in their repayments but are unlikely to not be charged any interest at all.
The reason for this is that trackers charge interest at a set percentage, such as 1%, above the base rate, meaning the base rate would need to be deep into negative territory before mortgage rates followed suit.
Many tracker deals also include clauses, known as collars, stating that the interest charged will never fall below a certain level.
There has only been one case of mortgage customers receiving negative interest rates, which occurred in 2019 when Danish lender Jyske Bank offered a rate of -0.5% a year.
Even then, borrowers were not paid by the bank, with it instead reducing their outstanding mortgage debt each month by more than the amount they repaid.
While borrowers in the UK are unlikely to benefit from a similar scenario, negative interest rates are still likely to lead to lower mortgage rates.
The news is less good for savers, who are likely to earn lower interest or even no interest on the money they have deposited with banks.
But it is unlikely most consumers will have to pay to keep their savings in an account, with banks expected to limit charges on deposits to large corporations and very wealthy individuals.
What knock-on effect could it have on the housing market?
As a general rule, low borrowing costs support the housing market by making it cheaper for buyers to borrow larger sums.
With the UK already facing a mismatch between the supply of homes and demand for them, lower borrowing costs are likely to lead to higher house prices.
That said, the Bank is considering introducing negative interest rates because the coronavirus pandemic has created an extraordinary economic situation, so any boost to the housing market may be tempered by lower consumer confidence and rising unemployment.
When was the last time we had negative interest rates?
In its 326-year history, the Bank has never previously introduced negative interest rates.
But central banks in Europe and Japan have had them in place for some time.