It seems to be the time of year when good old Capital Economics comes out with its usual report saying that house prices are going to fall 10% at least sparking the usual media frenzy. As usual, they will no doubt be wrong once more.
Even in April, we saw that prices rose sharply again, but we do know that the current boom and double-digit growth figures are going to wane as inflation is now tipped to hit 10% and rising food, energy and fuel bills are squeezing people’s pockets.
Meanwhile, lenders are becoming more cautious around affordability, which will restrict what people can borrow and we are seeing some valuers start to put their cautious pants on in the morning.
Few can deny that there is an economic storm blowing in, but a nationwide drop of 5% and 10% in the capital is bearish in the extreme. Economists have repeatedly predicted countless property market crashes and the property market has proved them wrong on just as many occasions.
Yes, mortgage rates are going up but you have to caveat this with the fact that they are still historically low and borrowers have been stress-tested very rigorously for scenarios where they are required to pay higher interest rates. Also, let’s not forget the lack of stock and new homes being built. That’s another glass floor under prices.
In the meantime, the banks are robust compared to the Global Financial Crisis and the jobs market is also very strong for now. In other words, few who work on the front line of the property market rather than in the ivory towers of the city expect any dramatic fall in prices. We are looking at a plateau rather than gazing over a yawning chasm.
Meanwhile, rents continue to strengthen with Zoopla reporting an 11% rise in the UK and a 15% rise in London year-on-year. They also showed that tenancy lengths have increased as many roll-over existing tenancies and the average time to let a property is now 14 days.
The Buy to Let market seems to have had another pick-me-up of late, with lenders still offering competitive products and keen to lend.
The good news is that buyer sentiment remains pretty upbeat, with OnTheMarket’s property sentiment index showing that UK movers remain confident of getting a mortgage.
And so they should as lenders remain very much open for business, keen to lend and still have some pretty hefty targets to hit this year. I expect competition to be fierce especially in the second half of the year which may see some further relaxation of criteria and rates.
For now, though, getting in front of a decent broker as early as possible has never been so important.
In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 2.23% (4.00% APRC) and 5-year fixes from 2.45%, (3.90% APRC), with 7-year fixes cheaper at 2.26% (2.40% APRC), whilst variable discounted rates are around from 1.29%, (5.00% APRC).
Yes, you are seeing right; a 7-year fixed, as well as a 10-year fixed for that matter, is now cheaper than the best 5-year fixed!
Those looking at Buy-To-Let can now obtain products from 1.64%, (4.40% APRC) for a 2-year tracker or 5-year fixes are available from 2.36% (2.50% APRC).