If house prices stop rising, low deposit borrowers will suffer – Star Letter 19/03/2021

If house prices stop rising, low deposit borrowers will suffer – Star Letter 19/03/2021

 

This week’s comment was from Andy Wilson, in response to the story: House prices forecast to lose 2020 gains –Reallymoving 

Wilson said: This news demonstrates how volatile house prices are likely to be this year. Demand has been artificially buoyed due to the stamp duty holiday, now extended, and we will see further demand for a short time.  

This will be compounded by the new first-time buyer 95 per cent loan to value (LTV) mortgages, which will maintain demand once again. 

He added: “However, as we can now see when things change, demand eases or prices agreed start to reduce. The article relates to offers made in February from buyers who suspected they were too late for the original stamp duty cutoff date.  

six-month extension for some will end by October – so what then? A new drop in prices? What position will the new 95 per cent LTV borrowers be in? Negative equity? How long will it take for prices to recover? 

 

Redundancies ahead 

Wilson continued: Prices may be further depressed due to fewer people being able to get mortgages following redundancies when furlough payments end. I suggested previously that many were being kept on in businesses that knew when furlough payments were withdrawn, their businesses were unsustainable 

Thorntons Chocolates are the first example of this, closing all of their stores soon and making 600 redundant. They will not be alone. 

 

Low deposit worries 

House prices may stay on the rise, and everyone will be happy,” Wilson added.  

He said: However, if not, the only ones who will suffer will be the clients we have helped into low deposit mortgages. We have to make it very clear to them upfront what could happen.  

There is a reason lenders have been reluctant to offer 95 per cent mortgages for some considerable time. I find it surprising two lenders have so far announced new deals without using the government scheme.