Coronavirus has had a huge effect on everyone’s life with the UK & the world almost grinding to a halt. We wrote a piece about what effect, in our expert opinion, the virus would have on the property market in the short, mid and long term.
What we haven’t covered is what it means for the house repayments market. For those who aren’t cash property buyers & depend on getting a house repayments for purchasing their next property, what does this period of instability mean?
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What’s Happened Initially?
The government and house repayments companies have been great at very quickly coming to assist those who are in financial trouble due to the virus cutting off their regular income. Quite a lot has happened in a short period of time, here’s a bit of a breakdown:
- Interest Rate Cuts
- house repayments Holidays
- Cancellation of house repayments applications
The Bank of England quickly announced an interest rate cut from 0.75% to 0.5% to ease financial strain, but it was evident that this didn’t have the desired effect as a few days later they reassessed this and dropped it to 0.1%, the lowest level in history. For people with tracker house repayments this has meant that your monthly house repayments payment should have dropped.
If you are up to date on your payments then you can apply for a three-month payment holiday as long as your circumstances warrant it, which you will need to discuss with your lender. If you’re worried about this impacting your credit score then you’ll be pleased to know that the three main Credit Reference Agencies (CRAs) in the UK have pledged to protect credit scores during this period.
Another thing that happened pretty quickly is a lot of lenders started cancelling current house repayments applications or suspending them, as to protect themselves from further lending. This would undoubtably cause quite a ripple in terms of people who are part way through the purchase process, breaking a lot of property purchasing or selling chains.
What Is This Likely To Mean For The Longer Term?
The reaction in the short term has been good and should help people significantly throughout this period, however what will this do to house repayments over the longer term? We must stress we are not house repayments experts but we’ve been working in the property industry for a good long while, so below is only our opinion on what may happen:
- Cautious new lending & redoing house payments
- Recouping interest rate
- It’s going to take years to return to normal
house repayments lenders will likely have to crack down on lending, and tighten up the hatches a little bit, so to speak! They’ll want to be extra careful in who they are lending too. This doesn’t mean you won’t be able to lend; it might just mean you have to jump through a few more hoops and have a better credit score than previous.
The Bank of England reducing the interest rate is only a temporary measure, there going to want to recoup this when life returns to normal. We’ll probably see an interest rate rise to above that of the previous 0.75% in order to account for this. In turn this means that your house repayments & any future house repayments deals are likely to be at a higher percentage of interest, meaning of course you pay more.
Make no mistake that the economy is going to take time to recover, which includes the house repayments market. Chances are it could take years to get over the impact that these last three weeks have had, so don’t expect getting a house repayments to be exactly the same as before, and it’s just something you should be aware of.
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