Real Estate

Banks in talks with ministers over whether to freeze UK housing market

Banks and building societies are in talks with ministers over whether to call a halt to the UK market for home purchases, as the fallout from coronavirus hits their ability to offer mortgages, service existing borrowers and obtain valuation surveys on properties. 

UK Finance, the finance industry body, has written to lenders saying it was seeking “urgent clarification” over the future of the housing market, which is struggling to operate under extremely difficult conditions. 

The note, which was seen by the FT, said the government had now advised that “home buyers and renters should, as far as possible, delay moving to a new house while emergency measures are in place to fight coronavirus”.

“If moving is unavoidable for contractual reasons and the parties are unable to reach an agreement to delay, people must follow advice on social distancing to minimise the spread of the virus.”

The Ministry for Housing, Communities and Local Government had not replied to a request for comment by the time of publication. UK Finance declined to comment. 

A host of banks and specialist lenders have already withdrawn products for new house purchases in order to focus on existing customers and reduce pressure on call centres that are low on staff.

Lloyds Banking Group and Barclays, two of the UK’s biggest lenders, told mortgage brokers they were temporarily pulling many of their home loan products. Lloyds has stopped offering mortgages or remortgages through brokers unless the customer has a deposit of at least 40 per cent of the home’s value.

Barclays told brokers it would no longer offer mortgages for home purchase below the same 40 per cent threshold, but it will continue to offer remortgaging deals.

David Hollingworth, director at broker L&C Mortgages, said lenders were moving to stem the flow of new business as they coped with tens of thousands of requests for mortgage payment holidays, which banks have offered to those struggling financially as a result of the coronavirus fallout. But some of their staff are either self-isolating or ill, putting pressure on their ability to process requests or conduct business.

“The purchase market will effectively go into cold storage,” he said. “You’re just not able to go out and buy a house even if the vendor wanted you to come round.”

The industry is also seeking to extend the length of time borrowers have to complete a transaction after receiving a mortgage offer, in order to stop transactions that are already in motion from falling apart, according to two people briefed on the discussions.

Mortgage offers are usually valid for between one and two months, but lenders are looking to provide a three-month extension.

One banking executive said lenders want to provide flexibility but cautioned that “it does present legal challenges — what happens if a seller changes their mind in the next three months?”


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