Cherry Mortgage and Finance believe housing market is "likely to suffer"
While there are no shortage of economic concerns on a global scale surrounding the Covid-19 outbreak, mortgage broker Matthew Fleming-Duffy, of Cherry Mortgage & Finance, has spoken to The Parliamentary Review to air his concerns about some of the policies the government is putting into action.
It was just last week that the Bank of England announced they would be cutting the base rate from 0.25 per cent to 0.1 per cent, just eight days after they had reduced it to 0.25 per cent to 0.75 per cent.
This new figure of 0.1 per cent is the lowest the rate has been in history, and the move has an immediate positive impact on homeowners with a mortgage. According to BBC personal finance reporter Keith Peachey, however, "little will change for savers".
Most would see this as a broadly positive move that protects everyone aside from the banks and the lenders. But Parliamentary Review member Matthew Fleming-Duffy explains that it is not necessarily such a good thing in the long-term.
"While the Bank of England dropped their base rate to an all-time low last week, it must be noted that this is more of a macro-economic stimulus which assists large banks with liquidity and provides a sense of stability to money markets," He said.
"We aren't necessarily seeing this being passed on to consumer products. So, even though individuals with mortgages on a Bank of England base rate tracker will benefit immediately from the rate drop, we are actually seeing some lenders increase their interest rates.
"In the meantime, capital markets appear to be closing, so some lenders are freezing applications for new loans. Surveyors are unable to visit people's homes so, unless a lender is willing to accept desktop valuations, mortgage cases cannot be progressed.
"Most lenders have kicked their contingency plans into action and are still able to function with skeleton staff in their offices with the remainder working from home, but operations have certainly slowed down.
"In short, the process for applying for a mortgage and/ or moving home has just become a lot more difficult and this is having a knock-on effect on consumer confidence. The housing market - and all of the support services that operate within it - is likely to suffer as a consequence."
Although Boris Johnson has repeatedly said that this economic situation is "unlike 2008" because there is "nothing systemically wrong with the economy", Matthew is not convinced.
"It's an impossible task for any government to maintain confidence in the mundane when faced with a global crisis such as this. Boris Johnson told the UK that it was facing a 'moment of national emergency' and it was necessary to instruct UK residents to stay at home to protect the NHS and save lives.
"It is without question that trying to prevent the spread of deadly diseases and taking the appropriate action where necessary – based on the best information we currently have available – is imperative for any government.
"However, there are many healthcare issues and existential threats to humanity that have not attracted such attention and this particular course of action has far reaching economic and social consequences.
"In spite of the raft of measures the government is offering to support individuals and businesses through these troubled times, I fear that – unless we see the light at the end of the tunnel soon – we are likely to find ourselves dealing with the economic fallout of this policy for years to come."
For more information on Cherry Mortgage & Finance, you can read Their Parliamentary Review article here.