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Mortgage payment holidays extended until July next year

Mortgage lenders have extended mortgage payment holidays until 31st July 2021 for those whose finances have been affected by the pandemic.

People have until 31st March 2021 to apply, while they need to do so before 31st January to get a six-month deferral.

Those who have already taken a six month payment holiday are ineligible, and will need to contact their lender for “tailored support” instead.

Eric Leenders, managing director of personal finance at UK Finance, said: “Lenders are continuing to provide unprecedented levels of support to help customers through the Covid-19 crisis, with over 2.6 million mortgage payment deferrals already granted.

“As the impact of the pandemic continues to be felt across the country, the banking and finance industry stands ready to deliver ongoing assistance to those in need.

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“While it will always be in the long-term interest of customers who are able to do so to resume making payments, all lenders will be providing tailored support for anyone who is still struggling.

“There are a range of different ways to get in touch, including through online chat, social media and mobile and banking apps.

“As you will appreciate, phone lines are very busy at this time and we would encourage only those customers who are facing an immediate issue with their finances to call their provider in the first instance.”

Lenders will not enforce repossessions, or attempt to get a warrant for possession before 31 January 2021.

Robin Fieth, chief executive of the Building Societies Association (BSA), said: “Whilst the best advice is always to pay your mortgage if you are able to, anyone who is struggling to do this could benefit from the extension to the mortgage payment deferral scheme or other tailored support that is available from lenders.

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“It’s important that customers discuss their situation with their lender as soon as they become concerned, and before they miss a mortgage payment. Lenders will do everything in their power to help borrowers in financial difficulty at this challenging time – keeping people in their homes is the objective.

“The FCA has been in listening mode throughout the pandemic and their final guidance includes industry suggestions, specifically the ability to top up to six months even if a borrower has had two shorter deferral periods already and not excluding borrowers who have missed a payment after a deferral period from the scheme.”


Source: Property Wire

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Bank of England: UK economy ‘likely’ to need further stimulus

Bank of England interest rate-setter Michael Saunders said today that it was “quite likely” that more stimulus will be needed for Britain’s Covid-hit economy in a downbeat speech on the outlook.

“I consider it quite likely that additional monetary easing will be appropriate in order to achieve a sustained return of inflation to the two per cent target,” Saunders said.

Growth was likely to disappoint relative to the Bank’s forecasts published last month, Saunders said.

He said an ongoing recovery was the result of a “benign window” – the combination of huge government spending and the relaxation of lockdown measures.

“This window may now be closing,” Saunders said, adding that a downside scenario for the economy would be “very costly”.

Saunders said the withdrawal of the government’s furlough scheme at the end of October was likely to lead to a spike in unemployment.

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“Unemployment is likely to rise significantly in coming quarters as the furlough scheme winds down and workforce participation recovers,” he said.

“The scale of the projected rise in unemployment (about 3½ percentage points) is similar to that seen in 2008-11, but it occurs much faster. Indeed, it would be, by some distance, the sharpest rise in unemployment for at least 50 years.

“While there are uncertainties around that forecast, my view is that the picture of a sharp rise in unemployment is – sadly – highly plausible,” he added.

On Wednesday, the Bank’s deputy governor Dave Ramsden and another rate setter, Gertjan Vlieghe, also warned the economy could suffer more damage from the coronavirus crisis than spelt out by the central bank last month.

Many economists expect the Bank to announce a ramping-up of its bond-buying programme in November.

By James Booth

Source: City AM

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UK economy will suffer extremely large hit from coronavirus, warns rate-setter

Britain will suffer an “extremely large” hit to spending in the economy from the coronavirus lockdown – and monetary policy and Government actions cannot fully offset the impact, a Bank of England policymaker has warned.

Silvana Tenreyro – one of the Bank’s nine Monetary Policy Committee (MPC) members – also cautioned the UK recovery is likely to be “less V-shaped than one would like”, suggesting the bounce-back may not be as immediate as previously hoped.

In a speech broadcast online, she said the Bank stood ready to “do whatever it can” to help lessen the blow to households and businesses.

But she stressed monetary policy cannot “tackle such difficulties alone” and warned that even together with the Government’s mammoth emergency support, there will still be rising unemployment and shrinking output.

Ms Tenreyro said: “The data we have so far suggest that the drop in aggregate spending already taking place will be extremely large.”

She added: “Given the scale of the shock, it will not be possible to avoid further consequences for the economy.

“There will be a fall in employment where businesses fail or workers are made redundant.

“These occurrences should be ameliorated by the policy measures that have been put in place, but will not be prevented in full.”

She stressed that even without the lockdown and restrictions put in place, gross domestic product would have fallen sharply as Britons increasingly opted to stay at home.

“The fall in demand was clear in high-frequency indicators such as restaurant bookings and retail footfall, which fell sharply even before the Government’s decision to close restaurants and shops,” she said.

The Bank is forecasting inflation to fall below 1% from 1.7% currently in the next two months as fuel costs plunge thanks to crashing oil prices.

But while Britons will see rises in the cost of living ease, they will be knocked by falling wage growth, according to Ms Tenreyro.

She said: “Despite the policy responses, we will not be able to avoid a rise in unemployment, which will weigh on real wage growth across the economy.”

While some firms will see a rise in demand by offering alternatives, such as online food and grocery services to replace cafes and restaurant, she said this will be outweighed by the overall fall in spending due to falling incomes and consumer uncertainty.

She said: “Covid-19 is having unprecedented effects on all of our lives.

“The MPC, co-ordinating closely with other policymakers in the Bank and in government, will do whatever it can to minimise the economic disruption that the crisis could cause for households, businesses and financial markets.”

The Bank has already slashed interest rates to a new all-time historic low of 0.1%, from 0.75% previously, and unleashed another £200 billion of quantitative easing (QE) among a raft of actions to help the economy weather coronavirus.

But the Bank has already previously said it sees little benefit in taking rates below zero, suggesting it will have to look to more QE or radical options if further monetary support is needed.

Ms Tenreyro admitted the MPC is in unprecedented territory with the current crisis.

“The nature of the economic shock from Covid-19 is very different from those to which the MPC has previously had to respond,” she said.

Source: Express & Star

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Homemovers ready to press ahead when they can

Three quarters (75%) of people who were at the early stages of moving before the pandemic still want to move house as soon as possible, with a further 18% hoping to do so by the end of the year.

Research from reallymoving found that most (62%) want to use the lockdown period to get as far ahead as possible, so they’re ready to hit the ground running when the current restrictions are lifted.

Rob Houghton, chief executive of reallymoving, said: “Homemovers at all stages of the process currently remain determined to press ahead at the earliest opportunity, suggesting we could see a quick recovery in housing market activity when the current restrictions on movement end.

“Before the coronavirus crisis hit, we were experiencing the strongest spring market for several years and this research suggests that demand has not yet melted away.

“But considering the main concern for movers is falling house prices, picking up the pieces of an existing move may require a renegotiation of the price along the chain and for some parties, particularly those who have had their incomes reduced, that move could become unviable.”

Those who have agreed a deal and are already in the process of buying and selling a property when the lockdown commenced potentially have the most to lose, having already invested money in the transaction.

A third (29%) have decided to put their transaction on pause temporarily, while 6% are no longer willing or able to proceed and 3% have already seen their chain collapse.

The main reason for withdrawing is nervousness over house price falls (26%).

Houghton added: “Until activity resumes it will be difficult to predict the full impact on volumes and prices, but it’s encouraging to hear the determination of buyers and sellers to stick with their plans and progress their move as soon as possible.

“For now, the most important thing is that people follow the government’s advice to stay at home and keep removers, homeowners and tenants safe.”


Source: Property Wire

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Clarity Called For On Rent Payments

A clear statement is needed from Government in response to campaigners’ calls for rent payments to be stopped during the coronavirus crisis, said the National Residential Landlords Association this week.

It has logged ‘more and more’ landlord calls saying their tenants are under the impression they no longer have to pay rent as a result of the national lockdown. It is clear there needs to be more clarity in guidance on rents, making clear that these should continue to be paid where possible.

‘Some tenants believe that because lenders have provided the option of a three-month mortgage payment holiday to landlords, they should not pay rent for this period’, said the NRLA.

Groups including the National Union of Students are campaigning for rent breaks for all tenants, it has pointed out.

‘While the NRLA believes flexibility is necessary during these unprecedented times, it is calling on the Government to better publicise its guidance that tenants must still meet their legal and contractual obligations where they can – including paying rent – to dispel any myths’.

The response to the Coronavirus does not give tenants a green light to stop paying rent, said NRLA chief executive Ben Beadle.

‘The mortgage repayment holiday is only available for landlords who are struggling to make their payments because their tenants are unable to pay part or all of their rent as a direct result of the coronavirus and through no fault of their own. It is not an automatic payment holiday and landlords who successfully apply still have to make these payments later on. It is not a grant.

‘What it does allow is that where a tenant is having genuine difficulty in meeting their rent payment because of a loss of income, landlords have much greater flexibility to agree a mutually acceptable plan with the tenant to defer the rent due’.

The NRLA points out that 94 per cent of private landlords rent property as individuals and 39 per cent reported a gross income of less than £20,000. Many depend on the extra rental income for their livelihood. Without a rental income many would be unable to continue letting property, leading to a housing supply crisis when the epidemic eases, it said.

The NRLA has called on landlords to show as much flexibility with tenants as they are able to within their means. It said it has been ‘heartened by the many stories showing tenants and landlords pulling together at this difficult time’.

Source: Residential Landlord

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Calls for stamp duty holiday as UK house prices set to fall amid coronavirus crisis

The government has been urged to take action to support the housing market, including a stamp duty holiday, as UK house prices are forecast to drop due to coronavirus.

The Royal Institution of Chartered Surveyors (Rics) has called for a stamp duty holiday as a “short term measure”. It said it could encourage potential buyers to act after the immediate public house crisis has passed.

The call came as a survey found 74 per cent of respondents expected London house prices to drop within three months. UK house prices are also expected to fall.

Last month 39 per cent of chartered surveyors reported a fall in buyer demand in the capital. 60 per cent more respondents reporting a fall in agreed sales than in February.

New homes coming onto the market dropped sharply in March, with a net balance of -63 per cent of London respondents reporting a fall.

Meanwhile, six per cent of landlords have reported a rise in new instructions during March. Tenant demand rose 19 per cent.

Respondents said the virus will drive rents down in London over the three months.

Hew Edgar, Rics head of government relations said: “As we start to emerge from this crisis… it is likely that the finances of potential homebuyers will be under strain, and the burden of stamp duty could put buyers off.

“For those who can afford to move they may lack confidence in the market, adding to the slow down.”

A stamp duty holiday could “reactivate the housing market quickly as a short term measure,” he said.

Simon Rubinsohn, Rics chief economist, added: “The feedback from the survey does imply that further government interventions both in the wider economy and more specifically in the housing market may be necessary to aid this process supporting businesses and people back into work.”

By Jessica Clark

Source: City AM

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UK housing market on hold due to coronavirus crisis – Halifax

Britain’s housing market is largely on pause due to the government’s coronavirus lockdown which will make it hard to calculate price changes, but it is too soon to gauge the long-term impact, mortgage lender Halifax said.

Halifax said house prices in March were flat month-on-month – the first time they did not rise in five months – after a 0.2% rise in February. A Reuters poll of economists had pointed to a 0.1% uptick.

In annual terms, house prices rose 3.0% in March, speeding up from growth of 2.8% in February but a smaller increase than the Reuters poll forecast of 3.3%.

Halifax Managing Director Russell Galley said the housing market began March in recovery mode as political uncertainty about Brexit and the country’s leadership faded away, following Prime Minister Boris Johnson’s election victory.

“However, it’s clear we ended the month in very different territory as a result of the country’s response to the coronavirus pandemic,” he said, echoing comments by rival lender Nationwide last week.

“On a practical level, most market activity has been paused,” Galley said.

The government has urged people to avoid moving home during the outbreak. It has also ordered much of the economy to close, leading to an expected steep recession in the first half of 2020.

“Activity will inevitably fall sharply in the coming months,” Galley said. “It should be noted that with less data available, calculating average house prices is likely to become more challenging in the short-term.”

But it was too early to assess what long-term impact the current lockdown might have on the UK housing market, he said.

“We continue to have confidence in the fundamental strength of the housing market and remain ready and willing to lend on new mortgages,” Galley said.

Howard Archer, an economist with EY Item, a forecaster, said once the government restrictions begin to be lifted, the housing market should get going again.

“Even so, given the major hit that the economy is taking, the likely substantial rise in unemployment and the hit to many people’s incomes, the housing market looks unlikely to return to the levels seen at the start of 2020 for some time,” he said.

Writing by William Schomberg

Source: UK Reuters

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Can you still invest in UK property during the coronavirus crisis?

Never in the history of the UK property market have we seen such a turnaround in sentiment. In January UK house prices were rising after the Conservative election victory and the expected resolution of the Brexit furore which had been dogging the country for the best part of four years.

Bank of England data has indicated that over 73,000 new mortgages were approved in February – a six year high which is now looking relatively meaningless as an indicator for UK property investment.

March will NOT be reflecting such positive sentiments: according to forecasts from Zoopla, we can expect a 60% decline in residential property sales in the months ahead as the entire UK residential sector goes into deep freeze. For those planning to buy UK property as an investment, especially overseas buyers watching the pound plummet against other currencies, the big question is how to get into this market while it is so cheap?

At the time of writing, the UK is in lockdown with the government advising buyers and sellers to avoid moving. It also means that it is extremely difficult if not impossible to arrange property viewings.

Housing stock still available for property investors

According to life tenancy specialist MacBeale, there is still housing stock available for investors who are looking at houses purely from an investment perspective. However, these are agreed deals which were negotiated prior to the coronavirus arriving in the UK.

Life tenancies are long term investments where the owner of the property is able to acquire it at a considerable discount, but is not able to actually live in it until the life tenant has died or gone into permanent care. They already have considerable discounts attached which are still larger than any discount that could be achieved from the current economic circumstances in the UK.

“All the existing stock price will remain unchanged as the formula for the discount is based on age against open market value,” explains Paul Beale, Director with MacBeale in the UK. “We are already looking to get new property via the secondary market from banks and insurance companies. These won’t be new life tenancies created from the open market, rather they will be existing stock which will be brought back to market.”

Beale thinks that UK house prices are currently holding steady as there are few forced sellers. This may change depending on how long the lockdown continues and its consequent negative impact on the British economy, with knock on impact felt in UK housing prices in Q3-4. With sterling now very weak, however, he reports increased interest in UK property again from overseas buyers, especially from East Asia. “We see this trend continuing,” he adds.

Overseas investors will also be aware that the latest UK budget has introduced a 2% surcharge for foreign buyers of UK property, which will take effect next year. This, coupled with a weaker pounds, is creating a fairly small window of opportunity for anyone living abroad looking at UK residential property as an asset class.

Source: The Armchair Trader

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What does the coronavirus crisis mean for UK house prices?

We’ve been in lockdown all week, and I’ve been writing about coronavirus nonstop. (In fact, it’s been such a busy week that I literally just stopped for a minute there to check that we’ve only been in lockdown for one week, and not two). And yet I realised that there’s something missing.

I haven’t said a word about the most important asset class in the UK. It’s time to rectify that oversight. Today we ask: “What does coronavirus mean for house prices?”

The UK housing market is closed for business

Let’s start with the obvious. No one is allowed to leave their houses except for essential purposes. Essential purposes – wild as that may sound to some – do not include house hunting. So that means the residential property market is pretty much closed.

Quick interjection here for those of you who are currently in the midst of moving and wondering what to do now – the government yesterday said that “there is no need to pull out of transactions”. And if you’re moving into a vacant property, you can basically go ahead as before.

But if you’re moving to a currently occupied property, “we encourage all parties to do all they can to amicably agree alternative dates to move, for a time when it is likely that stay-at-home measures against coronavirus… will no longer be in place.” In other words, chains across the country are going to be extended massively and potentially to breaking point. (We’ll have more on the mechanics of all this in next Friday’s issue of MoneyWeek – sign up now and you’ll get your first six issues free).

Property website Zoopla apparently reckons that the number of homes sold in the UK will fall by 60% in the next three months. I hate to say it, but that actually sounds optimistic to me – and buying agent Henry Pryor, no stranger to MoneyWeek readers, agrees.

Deals are also going to fall through left, right and centre. Would you move now, unless you absolutely had to? No chance.

There’s another reason the housing market is closed: banks are rapidly shutting down the range of mortgages they offer for new purchases. In effect, unless you can stump up a 40% deposit, you’re going to find it difficult to get a mortgage to buy a house, even if you really want to go ahead right now.

Why is this happening? Firstly, the banks say they are struggling with staffing, which is fair enough given that call centres the world over are shutting. More pertinent though, are two key factors.

One, you can’t tell what a house is worth right now because liquidity in the housing market (always tricky even at the best of times) is gone. It’s very hard to value a home when there are no comparable sales to gauge it against.

Two, you don’t know how secure your customer’s job is. The government has put in place some very strong temporary measures to protect people – but what happens in a year’s time? What state will the economy be in?

Do you want to be writing loans to individuals whose future income is uncertain, secured against assets of uncertain value? Nope, and banks don’t either.

Of course, in pulling the supply of credit to the housing market, they risk creating the very scenario they fear. But as my former colleague Phil Oakley noted to me the other day, that’s what banks always do in these situations.

What does all of this mean for house prices?

OK, so we have a near-total housing market freeze. What does that mean for prices and other financial side-effects?

From an investment point of view, the market appears to have just woken up today to the fact that none of this is good for housebuilders. Housebuilders make houses. If no one is buying their products, they need to hunker down and conserve cash. Maybe they’ll get a chance to build land banks on the cheap, but maybe not.

So you’d probably want to avoid that sector for now (we’ll see how cheap they get).

As far as the housing market goes: the obvious point is that you won’t be able to trust any price or transaction data for several months. There will be some forced sales (hopefully not too many, given that people should now be able to ask for three-month mortgage holidays where needed), and there will be some cash buyers.

However, for anyone who isn’t a professional property flipper or large-scale landlord, none of that is terribly relevant. In stockmarket terms, this isn’t a crash – it’s more like the market has actually been shut.

So what happens when it re-opens? That’s more important. House prices are pretty much driven by the price and availability of credit. If interest rates are low, and you can also get a mortgage easily, then house prices will be high.

If rates stay low but it’s hard to get a mortgage, then transactions probably dry up, but those that do go through will still be at relatively high levels (in effect, you’re only allowing people with access to credit to move).

If rates go up, that’s when you start to see prices falling. Alternatively (or simultaneously), if lots of people lose their jobs and thus become forced sellers, that’s also when you start to see prices falling.

So what’s likely to happen? I guess it depends. The estate agent optimists argue that there will be pent-up demand, but I don’t think we’ll get a V-shaped recovery. A lot of people who had wanted to move will either find that they can’t be bothered any more, or that they are too worried about job security to do so. So I can see it taking a while for transaction levels to recover.

But what about interest rates? I don’t see them going up. I think interest rates will be capped for quite some time and that inflation will be given as free a rein as possible to take off and start eating away at all the debt we’ll have incurred during this. That in turn could and should lead to higher demand for physical assets such as property.

However, again this depends on the economy bouncing back strongly and there being no lasting rise in unemployment. I think that’s still possible – and obviously in the longer run the economy will recover – but it’s the timescale that I’m not sure about.

Overall though, given the importance of house prices to UK households’ balance sheets, this isn’t good news for consumer confidence. But then, none of us is able to go out and spend widely right now anyway, so maybe that’s not as important as it normally is.

Long story short – you can’t move right now so worrying about house prices is probably a waste of time. In six months’ time, we’ll see where we are. In the longer run, I’d expect a combination of low rates and rising inflation to push prices up. But it might be a wee while before we get there.

By John Stepek

Source: Money Week

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Bank of England will ‘closely’ monitor credit to economy amid coronavirus crisis

The Bank of England’s Financial Policy Committee (FPC) said it will “monitor closely” the credit conditions facing the economy amid the coronavirus pandemic, and stands ready to take further actions if needed.

In minutes from recent meetings released this morning, the Committee said it “stands ready to take any further actions deemed appropriate to support UK financial stability”.

It described the “nature and global impact” of the shock caused by coronavirus and the speed with which it has spread as “unprecedented in recent history”.

The FPC said it “judges that major UK banks are well able to withstand severe market and economic disruption”, having “built up the resilience of the UK financial system over recent years”.

It also deems “household vulnerability is considerably lower than before the financial crisis”.

The Bank of England has twice slashed interest rates in response to the coronavirus outbreak, with the Bank’s main rate reaching a record low of 0.1 per cent.

The BoE has also launched a £200bn money-printing programme in a bid to calm panicked markets and support the economy.

Its FPC and Monetary Policy Committee (MPC), has also introduced measures to reduce financial stability risks associated with the pandemic and to keep credit flowing into the economy.

These include cutting the UK’s countercyclical capital buffer rate to zero per cent of banks’ exposure to UK borrowers, in the hope this would release up to £190bn of bank lending to businesses. The rate had been at one per cent and was due to reach two per cent by the end of the year.

Last week, the BoE cancelled this year’s stress tests of major banks in Britain and pushed back the implementation of new capital rules to help banks focus on supporting customer lending during the pandemic.

The FPC said today that the UK’s major banks have Tier 1 capital levels — a key measure of financial strength — over three times higher than before the global financial crisis.

“Businesses and households should be able to turn to the banking system to meet their need for credit to bridge through this period of economic disruption.”

It added that it “will monitor closely the response of banks to these measures as well as the credit conditions faced by UK businesses and households more generally”.

By Anna Menin

Source: City AM