It depends on your LTV - if it is low (ie big deposit) then you could cope with a temporary dip and still be able to move on if needed in the short term because you wouldn’t be in paralysed by negative equity.
If your plan is staying for 10 years then quibbling over £5K is silly.
However I personally would want a 5-10% discount from the original sale price (£330k) to carry on the purchase now in this state of uncertainty. Otherwise I would pull out and hold off to start looking again at the beginning of 2021 - so you would be in your new home this time next year. I think you would need this timeframe (at a minimum) to see a material shift in prices - there will be a lot sitting on hands for the first 6 months.
It also depends on your job security and if your mortgage offer would be extended, unchanged over the next 12 months. V unlikely - so you might need to do a calculation of a much worse deal or not even getting one at at (that could be because your LTV is now not seen as good enough).
So those are the hard core considerations if it was purely a business transaction and you were 100% a property investor that needed slack to be able to sell it quickly if needed.
However a certain % is also an emotional decision about creating a secure home base for your DC and a long term lifestyle choice.
So are you happy to continue living with your DP for another 12 months? Or will you now look to take on a 12 month rental (v few are 6 months). How much will this cost in non refundable fees and how much more is rent than mortgage. Add to this the fees that you have already paid out for the survey, mortgage fees, searches, legal fees for this failed attempt and add a duplicate of them all again if you decide to buy again next year. So quite a complex spreadsheet needed for costs of various scenarios - and you can see that your £5k is neither here nor there.
But more importantly are here school catchment decisions tied in with this specific property? Does it work for you as a perfect location and home? How challenging emotionally would it be to stay another year with your parents? Or get back to a temporary rental? How long were you house hunting for - is there loads of similar stock to this house or is it a rare find that suits your needs?
What I am trying to say is yes it’s important to go through finances with a fine tooth come to make sure you don’t do anything frivolous financially but also to consider what’s the true cost of pulling out financially and emotionally.
Sometimes we just need to get on with our lives and we might have to compromise.
If COVID hadn’t happened and you were 5-10 years down the line - would you have been happy to have bought and raised a family in this home? Because COVID will go away and any drops are likely to have recovered within 5-10 years.