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Election, UK Property Prices & Mortgage Rates

23.12.19

It was an extraordinary few hours on election night as the scale of the Conservative win became apparent. Whatever your politics, this decisive General Election result could deliver a massive adrenaline shot into the UK property market.

Expect a sharp uplift in transaction levels starting early in 2020, as buyers and sellers who have played it safe put their plans into motion. Spring for the UK property market could come early after this comprehensive election victory as there is a huge amount of pent-up demand out there that looks set to be unleashed on the market next year.

Although a lot of the hard work around Brexit has yet to be done, there is now political stability that will give a lot of people the confidence to get on with their lives. Couple this with the fact that borrowing costs are ultra-low and likely to remain so for a while yet, and this gives people even more reason to buy and sell.

Not so long ago, Brexit looked like bad news for bricks and mortar, but people will now be relieved it can finally be put to bed in many people’s minds. With so much red turning blue, the UK property market could be at the beginning of a long bull run.

UK Property Prices

Our predictions last year were pretty accurate, although it was perhaps an easier year to read in retrospect with uncertainty dominating everything. Growth of around 1% overall was never going to be spectacular.

Taking into account the decisive election result, a Brexit deal passing through Parliament and the breaking down of a wall of uncertainty, 2020 could look slightly different. I suspect we are likely to see a two-stage market, with the year starting strongly on a wave of good feeling and more people returning to the housing market.

The second half of the year could see the market tail off once more as the reality of trade negotiations start to bite, with a new deadline of the end of the year threatening to open up old wounds. This is especially true if trade talks are not going to Boris’s plans. Another series of “no-deal” threats would not be received well by anyone and could start the paralysis once more.

Overall then, although there are still some Brexit related issues and some doubts over the global economy, the lifting of some of the uncertainty and a generally positive vibe should help to provide some level of higher growth.

A 2% to 3% growth in house prices overall, is optimistic, but reasonably so.

Housing Policy

Of course, the Housing Policies of the new Government will also have a profound effect on the mood in the property market. It will be interesting to see just how Mr. Johnson addresses the needs of voters who were not traditional Tory supporters. He is keen to sure up the middle ground before a new Labour leader is announced and housing, as well as the NHS and education, is a big area of concern.

He will also be desperate to show how attractive Britain can be post-Brexit and continue to attract investment into the UK from overseas and support UK businesses.

We could, therefore, see some further tweaks to Stamp Duty, especially for First-Time buyers and will they finally manage to build any meaningful numbers of truly affordable homes? There is also the thorny issue of the future of the Help to Buy Scheme to be sorted out.

Mortgage Rates

The silly season came early in the mortgage market, with mortgage lenders battling it out on our High Streets. This price-war seems to have filtered into almost every area of the mortgage market and is no longer just about silly rates for those with at least a 40% deposit. Those with smaller deposits, longer-term fixes, and Buy-to-Let rates have all been affected.

There is also far more choice now available for buyers who do not tick the usual boxes, whether this be £1m plus mortgages, mortgages for those on a contract or freelancers, mortgages for the self-employed, ex-pats and a whole host of other issues.

Competition remains fierce and there looks like there will be no let-up as we approach the end of the year and the beginning of next. Lenders are keen to make up for lost time and both finish the year strongly, as well as look for a boost in completions going into next year.

It is tricky to say what will happen next to interest rates, with the Bank of England split on whether there will be a cut again before a further rise. If things do start getting better then this negativity could change once more, but I don’t think we will see any real change either way until Brexit and the trade deal is sorted out. Expect Bank Base rate to be about the same then as it is now.

Long-Term Fixes

Coreco were in The Sunday Times a couple of weeks back talking about the incredibly low rates on offer at the moment, with a number of lenders making a play in recent weeks to be the Christmas No 1. This year the honour looks like it will be with Halifax who are offering a stunning 1.44% 5-Year fixed rate up to 60% Loan-To-Value, (3.20% APRC). There is a £1,499 fee attached to the product.

There are now an amazing twelve lenders with 5-year offerings below the 1.6% level.

For those who want that little bit longer level of security, Barclays have a 7-year fixed rate at 1.89% with a £999 Arrangement Fee (3.10% APRC). Even 10-year fixes are reaching an extraordinary level now, with Coventry Building Society at 2.2%, (3.11% APRC), also with a £999 Arrangement Fee. This really is remarkable to be able to fix a mortgage for so long at such a low rate.

First-Time Buyers

In First-Time Buyer territory, there is so much activity in the market now with a wide range of lenders offering highly competitive products for those with a 5% or 10% deposit, and more lenders able to offer those buying through the Help to Buy Scheme.

NatWest, for example, are now offering a 1.8%, (3.9% APRC) 2-year fixed for those with a 10% deposit whilst there are a host of products available below 3% for those with a 5% deposit.

With recent reports showing that First-Time Buyers are the growth area of the market, lenders are offering a plethora of free valuations and cashback for those purchasing on top of the already low rates.

Remortgage

If ever there was a time to remortgage it is going to be anytime from now in the next few months. Those coming to the end of there current rate really should be reviewing matters as early as possible and not just relying on their existing lender rolling over onto a new rate.

With interest rates so low now may be a great time to review your repayment options, for example switching from interest-only to part repayment, reducing the term of your mortgage but keeping the payments the same, or actually raising that little bit more to finally do those works to the property.

You may also be in the fortunate position of having some decent savings which can be used towards an offset mortgage, helping you to potentially save thousands of pounds worth of interest on your mortgage.

Lenders are offering some great deals, complete with free valuation and free legals, with rates around from 1.19% (3.76% APRC) for a 2-year fixed through NatWest with a £995 fee. Alternatively, 5-year fixes are around from just 1.39%, (2.60% APRC) through Santander with a £1,499 fee.

Buy to Let

As for landlords and those looking at Buy to Let, there really is not much difference now between Buy-to-Let rates and those available for normal residential properties, if you are looking at buying or remortgaging in your own name.

NatWest, for example, are offering a 2-year fixed from 1.35% with a £995 Fee, (4.41% APRC), whilst you can get a 5-year fixed from BM Solutions at just 1.67% to 60% Loan-to-Value, (4.20% APRC).

Obviously there are a couple of things that landlords need to watch for that have come to the fore recently and we always strongly recommend that you take independent, professional tax advice before deciding whether to purchase in your personal name or through a Limited Company. There are pros and cons of both and the good news is that even purchasing in a corporate entity these days attracts some good rates.

Because rates are so low it is a fabulous time to revisit your portfolio and see where you can save money, especially in light of the most recent tax changes.

Summary

In summary then, whilst you would, of course, expect a mortgage broker to say it, we really do believe that this period of time will prove to have been an exceptional time to look at your mortgage options.

And who better to help you make sense of the market than your experienced, down-to-earth and friendly Coreco adviser.

Contact us on 020 7220 5110 or click here.

Coreco – A better way.

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