HOUSE prices have plummeted at the fastest rate in 11 years as the coronavirus pandemic “car crash” hits the housing market.
More than £4,000 was wiped off the average
house price in May, marking the biggest monthly fall in property values in over a decade, according to Nationwide Building Society.
The fall came after property values had previously hit a record high in April, rising by 3.7 per cent compared to the same month last year.
But in May, average prices fell by a huge 1.7 per cent.
It was the biggest month-on-month fall since February 2009 and pushed the average house price in May down to £218,902 from £222,915 in April – a difference of £4,013.
Figures from HMRC show that residential property transactions were down 53 per cent in April compared to the year before.
Robert Gardner, Nationwide’s chief economist, said: “In the opening months of 2020, before the pandemic struck the UK, the housing market had been steadily gathering momentum.
“Activity levels and price growth were edging up thanks to continued robust labour market conditions, low borrowing costs and a more stable political backdrop following the general election.
“But housing market activity has slowed sharply as a result of the measures implemented to control the spread of [coronavirus].”
He added that the future of the housing market remains highly uncertain and depends on how far the wider economy recovers from lockdown.
Homeowners are being supported through the pandemic with a raft of measures, including taking mortgage payment holidays of up to three months.
Accepting applications for the payment freezes was supposed to end in June, but the watchdog today announced that the deadline will be extended until October 31.
Hopes for an economic rebound are also pinned on other schemes such as furlough, self-employed income support and payment holidays on personal credit products.
Mr Gardner added: “These same measures should also help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude.”
IT’S up to individual lenders to decide whether or not they take into account a coronavirus payment holiday when considering a mortgage application.
Although they can’t see a payment break on your credit score, they may use other methods such as Open Banking where it will show up.
Here’s what the banks have said they will do, according to MoneySavingExpert:
Barclays has said that it won’t necessarily use information of a payment holiday due to the pandemic when assessing a new mortgage application.
For example, a payment holiday with another lender won’t have an impact on your mortgage application.
All three banks are owned by Lloyds Banking Group. They’ve said that it will take payment breaks into consideration when deciding whether to lend to you, even if you took it out due to the coronavirus crisis.
Both are part of the same banking group, Royal Bank of Scotland. The policy here is that a coronavirus payment break would be considered but having one itself wouldn’t prevent someone from being approved a new mortgage.
Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, branded the impact of the pandemic in May a “car crash”.
He said: “The market feels a bit like returning after the Christmas/New Year break, with buyers and sellers waiting to see who will blink first as prices establish their post-Covid level.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “As physical valuations return, lenders are able to offer higher loan-to-values once more, returning to larger loans on the high street and in some instances interest-only borrowing.
“With some lenders cutting mortgage rates to ever lower levels, they are sending out a clear message to borrowers that they are open for business.”
“Admittedly, banks are in a much better position than 12 years ago to lend, given their high capital ratios and their ability to access cheap funds from the Bank of England’s latest Term Funding Scheme.”
Mr Tombs said: “Relatively few people likely will be forced to sell their homes, given that mortgage payment holidays are easily available and home ownership has declined.
“Nonetheless, the huge size of the blow from Covid-19 to households’ incomes and the deterioration in consumers’ confidence suggests that house prices must drop.”