First-time buyers looking to climb the real estate ladder after the coronavirus crisis may face a £ 12,000 deficit in their finances, as banks only offer high-deposit mortgages.
The government reopened the housing market last week after it closed in March in response to the COVID-19 pandemic.
But because of the fear of a collapse in house prices, banks are asking upfront buyers for more cash.
New buyers looking to climb the real estate ladder after the coronavirus crisis may face a £ 12,000 deficit in their finances as banks only offer high-deposit mortgages
A report released by Moneyfacts financial analysts showed that the number of mortgage transactions for clients with a 10% deposit fell from 780 in March to just 87, according to The Telegraph.
The first average buyer needs £ 24,189 for a 10% deposit. That amounts to £ 36,284 for a 15% deposit, according to a report from Rightmove, the property’s website.
This means that buyers could need more than £ 12,000 to buy the house they were interested in before the crisis started.
There are also only 30 different mortgages available to borrowers with a five percent deposit, up from 393 before the housing market closed.
Government reopened housing market last week after it closed in March in response to the COVID-19 pandemic
For customers available to raise a 15% deposit, 251 offers are available.
Deutsche Bank analysts said house prices could fall by more than a fifth.
And in what they called their “worst planning scenario,” Lloyds Bank said prices could drop 30% in the next three years.
Banks also fear that buyers will not be able to honor their monthly mortgage payments after household finances were badly damaged by the coronavirus epidemic.
Should you move? With the freeze on property sales finally over, find out if the time is REALLY good to buy or sell with our definitive guide
- Estate agent Knight Frank says prices may have dropped 5% since the foreclosure
- He plans to drop another 2% by the end of the year before prices start to go up
- Lloyds says “severe scenario” could see prices fall 10% by the end of the year
By Miles Dilworth for the Daily Mail
It was a different world when Valérie and Paul Sanders * agreed to buy a £ 700,000 four-bedroom house in Orpington, Kent.
They bought for cash and the seller moved into rented accommodation; there was no chain, no holdup.
But with the deal scheduled for March 23, the day the UK locked out, the sale became one of some 450,000 deals completed.
Estate agent Knight Frank says prices may have dropped 5% since the foreclosure. He predicts a further 2% drop by the end of the year before they start to recover
After the government restarted the housing market last Wednesday, the couple are now among thousands of buyers and sellers struggling with how to move their move forward in an unrecognizable market.
“Have house prices gone down?” Asked Valérie, 71 years old. “If yes, how much? And should we now go ahead and buy the house or offer a lower offer?
“We don’t want to buy it and find out in four months that the value has dropped 10-20%.”
Money Mail has spoken to real estate experts across the country to help you overcome the confusion.
WHAT HAPPENS TO THE PRICES?
Knight Frank says prices may have dropped 5% since the foreclosure. He predicts a further 2% drop by the end of the year before they start to recover.
But Lloyds Banking Group said that a “severe scenario” could see house prices fall 10% by the end of the year and 30% over three years, although a 5% drop here the end of 2020 is more likely.
The Royal Institution of Chartered Surveyors (Rics) says it does not expect a recovery until next Easter at the earliest.
AS A BUYER, SHOULD I RENEW THE NEGOTIATION?
Buyers can renegotiate the price before the contracts are exchanged. Money Mail revealed last week that some were already looking for discounts of up to 20%.
Real estate expert Henry Pryor says that a responsible approach must be sought. ‘Just say,’ Sorry, the deal isn’t working like it was before, ‘It’s about accepting the reality of a global crisis.’
But Jeremy Leaf, a north London real estate agent and former president of RICS, says he has yet to see any of his clients try to renegotiate.
Mortgage lenders can ask to reassess the property if a lower price is agreed.
But if you withdraw from a deal after the trade, you may be in breach of the contract and the sellers may sue for losses and may keep your deposit.
A virus could cost us the house of our dreams
Ben Smith and Maia Eyal had agreed to a £ 723,000 offer on a house before the coronavirus pandemic
Ben Smith *, 28, and Maia Eyal, 27, thought they had found the home of their dreams before the coronavirus pandemic.
With a wedding on the horizon and Maia seven months pregnant, they were delighted to have accepted an offer of £ 723,000 for a detached house in Barnet, north London, in late February. It would have been a big improvement from their little third floor apartment in Watford.
But pressing the restart button after the government lifted its move ban has proven difficult.
The couple, who both work in the airline industry, have since been put on leave and suffered wage cuts. Their mortgage offer increased from £ 419,000 to £ 350,000, which means they can no longer afford the new property.
They have placed a new offer of £ 675,000 and are nervously awaiting a response.
“We thought we had found the perfect place,” said Ben. “We are concerned that our new offer will not be accepted, which would mean having to find somewhere else.
This could be difficult, as few places have appeared on the market recently. We may have to consider something temporary.
* Not their real names.
WHO CAN BENEFIT?
Second-steppers may find that the discount on the largest property they want to buy is greater than the drop in value of their existing home.
Rob Houghton, general manager of the Reallymoving comparison site, says that while negative stocks pose a risk to those who bought recently with small deposits, those who bought their first home more than five years ago can resist any decline short-term price.
This could free up inventory for first time buyers, but they may find it more difficult to secure a mortgage.
Lenders have cut offers for those with deposits of 10% or less by more than 90%, according to data company Moneyfacts.
WILL MY MORTGAGE BE WITHDRAWN?
Banks are reviewing offers to households whose circumstances have changed during the foreclosure and may withdraw offers even if the contracts have already been traded.
Pay mortgage problems
Homeowners on leave may find it difficult to remortgage when their current contracts expire, experts warn.
Many lenders ask borrowers to provide a letter from their employer confirming that they will still have a job after the government’s retention program ends.
But Dominik Lipnicki, of Your Mortgage Decisions, says that many employers are unwilling to do so and “it can be a real problem getting a mortgage.”
The leave scheme means that the government pays 80% of workers’ income up to 2,500 pounds a month, or 30,000 pounds a year.
Employers can choose to supplement the remaining 20 percent.
But borrowers who have a mortgage that depends on their full income may not be able to reach a new agreement.
This could mean that more homeowners would switch to more expensive standard variable rates.
This could result in a loss of deposit
Anyone who has been on leave since accepting a mortgage may have to renegotiate their offer.
You may need to take out a small loan or a longer mortgage term.
Most banks have said they will count leave income for affordability checks, but not Virgin Money.
Lenders repress borrowers by using premiums and commissions to support their income, while the self-employed also see their claims examined in more detail.
SHOULD I RETAIN THE SALE?
Banks have restarted physical appraisals, and the Rightmove real estate website has reported a 111% week-over-week increase in new sales lists the day the market reopens.
But Steven Wayne, a Benjamin Stevens real estate agent, says it’s important that your property doesn’t get lost in the crowd.
He says it will take a few weeks for buyers to get used to the idea of visiting the houses again, so if you register them now, you risk popping the gun.
He adds, “You only have one chance to make a first impression. “
WHAT ARE THE NEXT HOT PROPERTIES?
There has been renewed interest in rural areas or small towns, with households adjusting to working from home.
Savills says there has been an increase in buyer registrations at Winchester in Hampshire, Newbury in Berkshire, Canford Cliffs in Dorset and East Neuk of Fife on the east coast of Scotland.
Rightmove director Miles Shipside said high demand could increase the value of properties with home offices or large gardens. However, the premiums granted to transport links may decrease.