It could be the middle of next year before the number of homes being bought and sold is back to normal levels, experts have said.
They said that people on the brink of making house purchases will be breathing a “sigh of relief” now that lenders have agreed measures to help them put their moving plans on ice.
But they also said that, while some pressure has been lifted from the market, the middle of 2021 could be around the time when transaction numbers recover to typical levels – as long as significant long-term economic damage can be avoided.
Home-movers will be given the option to extend their mortgage offer for up to three months, enabling them to move at a later date, UK Finance, a trade association for lenders, announced on Thursday.
The initiative will be open to customers affected by Covid-19 who have exchanged contracts.
Some property professionals said the market will not grind to a complete halt – as transactions such as probate sales involving empty properties and purchases of homes that are already occupied as buy-to-let investments will continue.
But some months this spring may see the volume of house sales plunging by as much as 80% compared with a year ago, it is predicted.
As well as the moves by lenders, the Government has urged people not to move house as part of efforts to limit the spread of coronavirus, although it said there is no need to pull out of transactions.
In guidance published on the gov.uk website, where the home being moved to is currently occupied, the Government is encouraging people to amicably agree alternative dates to move, for a time when it is likely that stay-at-home measures against coronavirus are no longer in place.
The guidance also says: “In the new emergency enforcement powers that the police have been given to respond to coronavirus, there is an exemption for critical home moves, in the event that a new date is unable to be agreed.”
Lawrence Bowles, a director in the residential research team at Savills, said: “Many hopeful home-buyers will be breathing a sigh of relief.
“Extending mortgage offers by three months will help people whose moving plans have been put on ice by the Government lockdown.
“Crucially, it will also reduce some of the pressure on the lenders, who face additional challenges when trying to value properties or carry out surveys.”
But Mr Bowles added: “We anticipate a slowdown in transactions over the coming months as people put off moving until some normality returns.
“If Government measures to support business mean we avoid significant long-term economic damage, we predict transactions will return to their long-term average by mid-2021.”
Richard Donnell, director of research and insight at Zoopla, said: “Taking into account the new extensions to mortgage offers, individual spring months may see newly agreed sales down by up to 80% on last year.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The question is: what happens in three months’ time?
“Does the extension continue for another three months? If so, property valuations are only valid for six months – do they need to be re-valued then? Will the applicants’ income situation have changed?”
Mr Harris added: “The market won’t grind to a halt. Cash buyers, probate sales involving empty properties, and buying properties that are already let as buy-to-let investments will continue. But transactions will plummet.”
Ben Johnston, director of property app Houso, said that, while there will be disruption, it will help to keep home-movers in the market and ready to proceed.
Jeremy Leaf, a north London estate agent, said: “What we have found is that most people, having made the decision to move, want to hang on in there and see what happens rather than take any dramatic steps to pull out, unless of course they have lost their job or their industry is particularly badly compromised.”
Before the mortgage offer extension announcement by lenders, there had already been signs that the mortgage options on the market were being restricted amid economic uncertainty.
Lloyds Banking Group has temporarily withdrawn new mortgage and re-mortgage products with a loan-to-value (LTV) ratio of more than 60% across its broker channels – Halifax Intermediaries, Scottish Widows Bank and BM Solutions.
It said customers could still apply for a mortgage directly online as normal with Halifax and Lloyds Bank.
Meanwhile, Barclays said earlier this week that it has withdrawn some products, although it said a number of lower deposit deals remain available and it expects to launch a fresh range of residential and buy-to-let products shortly.