The Current Unusual State of the UK Housing Market

The unprecedented economic conditions, owing to the coronavirus pandemic, and a messy Brexit has created unusual circumstances in the UK housing market. The real estate prices are high, and mortgage applications have spiked up, while the approval rate of mortgages has drastically gone down.

COVID-19 and its Impact on the UK Housing Market

COVID-19 has brought about a fundamental shift in the demand for homes. With more people working from home and looking for space and government initiatives to support the economy, investors are more inclined towards putting their money in a safe place, including houses. As a result, the housing prices in the UK are rising at its fastest annual pace since 2016. The annual growth rate of housing prices stood at 7.3% in September 2020, the fastest rate since June 2016. Moreover, the average price of a house is continuing its upward trend, with a jump of 1.6% in September 2020 compared to August 2020.

Due to the unstoppable rally in the housing prices, mortgage applications have also surged to their highest in the past 12 years. The lenders received more mortgage applications from first-time homebuyers than any time since 2008. However, the cost of mortgages is high despite the base rates being slashed to historical lows.

The challenges faced by first-time homebuyers have compounded due to the coronavirus pandemic. Several lenders are withdrawing their low-deposit loans considering the global economic uncertainty, a dramatic uptick in unemployment, and negative equity of borrowers. Not many financial institutions are supporting mortgages with 90%-95% of the property’s value anymore. If any, they have become highly expensive due to the higher risks involved. Overall, lending has become riskier with a rise in unemployment and financial uncertainties, making lenders more cautious and less lenient. As a result, the approval rate of mortgages has fallen by 90% since the beginning of the COVID-19 pandemic.

By Daniel Atkinson, please read the full article on London Daily Post.