Mortgage market: what to expect during the unexpected

Mortgage market: what to expect during the unexpected

July 2020

Three months on from hitting the pause button, what have been the biggest changes to the mortgage market in the UK?

The beginning of 2020 set the scene for a strong mortgage market. The general election in December seemed to break the Brexit deadlock and put an end to buyer indecision with the ‘Boris Bounce’. This was coupled with attractive mortgage rates from major lenders, meaning buyers only needed a small deposit to finally get moving.

Then in March when the coronavirus pandemic really hit the UK, all of this came to a grinding halt.

Lenders removed hundreds of mortgage products; surveyors were locked down from conducting physical inspections, and buyers and sellers were told to put their moves on hold by the Government.

So now, three months on, what have been the biggest changes to the mortgage market we've seen?

Housing market

The housing market was effectively unlocked in England on 12th May, with a partial reopening for Wales on 22nd June and Scotland given the go ahead for 29th June. This created (in England at least) a surge in enquiries as nearly half a million people looked to progress their plans to move. According to Rightmove, demand for property increased by 120% in the first week of lockdown restrictions being eased on the property market.

Interest rates

The Bank of England slashed interest rates to a historic low of 0.10% meaning although lenders are paying less to savers, they can potentially pass on these reductions to borrowers through low rate mortgage deals, and thereby enticing movers back to the property market.

Mortgage payment holidays

Lenders have granted mortgage payment holidays to their customers to help counteract the financial pinch during lockdown. To an extent, furlough payments from the Government have mitigated the need for customers to have to fully rely on these payment holidays. And as restrictions are eased further, many are becoming able to resume payments or even overpay to help ease the shortfall. In either case, the impact of coronavirus has changed customers’ financial circumstances and it is important to seek advice if you are unsure how to proceed with your mortgage payments.

High loan-to-value mortgages

Whilst lenders are still keen to lend, most still remain cautious as higher loan-to-value mortgages in the 90-95% bracket are scarce compared to pre-Covid volumes. First-time-buyers are likely to be the hardest hit as they may struggle to raise higher deposits for loans up to 85% of the property’s value, which seems to be becoming the new norm. With this in mind, developers are pushing ahead with new builds, so first-time-buyers may look to existing Help to Buy and Shared Ownership schemes to make their dreams of getting on the property ladder more affordable.


The buy-to-let mortgage market has seen similar changes in reduction in rates from lenders as well as landlords enjoying higher rental yields outside of London. Lockdown has changed people’s perceptions and circumstances significantly which has impacted on rental demand. After being confined at home for long periods, many are now seeking properties with gardens and areas away from larger cities, and may even look to rent before deciding on the right location. Job losses during this economic instability have also accelerated the need to move, meaning people will be considering the rental sector in the short-to-medium term.

Naturally, during these unprecedented times it is impossible to give any definitive answers on the long term impact of Covid-19 on the mortgage market, however early indications seem positive as broker activity continues to rise. Ultimately, the willingness to lend is there; the desire to move is there; and expectations are that people and businesses will continue to adapt to the new norms of mortgage lending to help keep the UK moving.

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