Catch 22 in the housing sector
Quite an eventful week in the financial world and Catch 22 in the housing sector.
Rishi Sunak has decided to do away with the budget this year and instead replace it with a spending review. With so many huge unknown’s such as the inevitable second spike of COVID and Brexit, that does seem like a sensible step, as well laid plans could well go out the window for so many reasons over the next 6 months.
Job Support Scheme
There was some support offered in the ‘Job Support Scheme’, which isn’t an extension of the furlough scheme apparently, even though it looks a lot like a furlough scheme, as it only covers ‘viable jobs’.
That makes it a creation Joseph Heller would have been proud of (the author of Catch 22). As over 3 million people are on furlough (12% of the workforce) to some degree, it is akin to weening the UK economy off a banned substance. So Rishi decided against going cold turkey, but the economy instead has moved onto rehab.
Catch 22 and the housing sector
This Catch 22 dynamic is equally prevalent in the housing sector. On the one hand we have historically low rates fuelling a housing boom (the Office for National Statistics suggest house prices went up 2.7% in August alone!), on the other, mortgage lenders with severely hampered capacity are now tightening criteria to try and stem the flow of new business so they can cope.
A highlight from last week was one lender (Accord) offering 90% mortgages for One Day Only! That highlights the dynamic perfectly as lenders start to do weird and wonderful things to manage workloads as the demand is clearly there.
As we slip into a semi lockdown as students can’t seem to social distance (imagine my surprise…) that may only exacerbate that issue, so as much as it pains me to say it, lender service I suspect will get worse before it gets better… That will leave some people thinking – shall I buy now and hope my application goes OK and prices don’t go pop next year? or hold tight and ride out any potential storm? Catch 22 stuff indeed.
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