Britain's Housing Market Freezes As Wave Of Delayed Mortgage Payments Looms
One of the more unorthodox measures implemented by No. 10 Downing Street when it placed the entire UK on lockdown earlier this week was a virtual freeze of the country's housing market. For nearly a week now, the housing market across the country has ground to a halt as agents have been prohibited from marketing new homes.
And on Thursday, the government took things a step further, and banned visitors from viewing properties while the "stay-at-home" measures are still in force.
The edict affects all transactions, blocking all transfers of title until further notice, while also banning evictions, it's basically forcing the entire county to stay put in whatever housing situation they have been living in. For those who don't have permanent housing arrangements, it's presumably been a struggle. But that's a relatively small slice of the population.
This is about all prospective homebuyers in the UK can do right now:
"You can speak to estate agents over the phone and they will be able to give you general advice about the local property market and handle certain matters remotely but they will not be able to start actively marketing your home in the usual manner," the government said on Thursday night.
A number of banks and specialist lenders have already withdrawn new mortgages to "focus on existing customers", even as demand for loans is expected to soar. The decision was meant to reduce stress on call centers as most places are expected to be low on staff in the coming weeks.
Lloyds and Barclays have already withdrew most of their mortgage offers, and are expected to cut off all loans currently in the process of being made unless the borrower can put down 40%.
Barclays told brokers it would no longer offer mortgages for customers who did not have a deposit of at least 40%, but it would continue with some remortgaging deals.
With so much uncertainty and such extreme fluctuations in interest rates and credit markets, banks are hoping to put things on pause until things have calmed down a bit.
Bankers told the FT that the withdrawal of mortgage products wasn't a signal that they were running short of financing, as happened in 2008 when funding markets froze.
But with so many borrowers warning lenders to expect delays on their mortgage payments until the federal stimulus checks have been issued, issuing new mortgages right now would almost be stupid. To continue lending money at a time when reliable borrowers are already having trouble doesn't seem to make sense, which is one problem that the government is going to need to solve with this bailout,