A time of change

Cammy Amaira

June 24, 2020

Cammy Amaira is sales and marketing director at the Tipton and Coseley Building Society

On Monday 23 March 2020, the UK was put into lockdown in an aim to protect the population from coronavirus.

Three months on and things are slowly starting to return to some sort of normality. But, what impact is the crisis likely to have on our mortgage and housing market?

In the short-term, it is expected that lower interest rates due to Bank of England rate changes will allow for lower borrowing costs, making it cheaper for new borrowers or those remortgaging.

However, it is important to acknowledge the short to medium-term impacts that the coronavirus crisis may have on affordability.

With 28% of people experiencing a drop in wages since the start of the crisis, and rising unemployment levels affordability is likely to become more difficult.

Paired with many lenders removing higher loan-to-value options, the outlook for first-time buyers looks dampened. The danger here is that with it being even more difficult for first-time buyers to enter the market, there may be a period where the market struggles.

Last year first-time buyers accounted for 36% of all housing sales. The ongoing pressures on affordability is also likely to have an effect on those looking to upsize.

As the potential of a recession in the short-term looks likely, further pressures on wage growth and demand for services from self-employed companies may drop, further expanding the problem.

On the bright side, recent figures show that most pre-COVID sales are now beginning to go through, and while UK surveyors expect a fall in house prices over the coming months, it is thought that this will be slight and prices should begin to rise again soon after.

We expect that house prices will continue to rise over the coming years, but it is important the affordability doesn’t get left behind as a direct impact of COVID.

While short-term difficulties are likely, we are hopeful that affordability enhancements can catch up with the recovery of the housing market.

As an effect of COVID, more and more people are working from home with 86% of people stating they expect an increase in working from home in the future.

Where we live is largely impacted by where we work, with daily commutes playing a large factor in choosing a home. With this noted, it is expected that as more people get used to working at home permanently, the demand for more rural properties may increase, thus lowering the demand for inner-city homes. This may also help to balance house prices within cities, with supply and demand being a large factor in pricing.

So, while we expect a short-term dip in the market it is hopeful that it will quickly pick back up again. This has been an unprecedented time for all of us in the market.

Whilst there may be challenges ahead for many prospective borrowers the early signs of recovery are positive across many areas, with estate agents, valuers & brokers all showing increases in activity levels.

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