House Prices ease but not by much

House prices are the main topic of conversation at the moment and it was interesting to see the results of the latest Halifax House Price Index published for May. This showed house prices down a smidgeon at 0.2% month on month and 0.5% down on the quarter. This means that overall house prices are still 2.6% higher than they were this time last year.

At a time when house price indices are questionable because of low transaction levels, it’s still interesting to see that despite a full-scale lockdown house prices have only fallen by a small amount.

This suggests that either the housing market is much more resilient than the doom-mongers suggest, or that we are yet to see the full effect of the pandemic on house prices.

If the real pressure on house prices is to come, it will be linked to the end of government support for workers in October when we will no doubt see a spike in redundancies and unemployment.

Even then, the amount of activity that we are seeing now as people return to house hunting suggests that any fall in house prices will be modest in comparison with some expectations.

Demand for housing

There are so many reasons why people still want to buy, whether it is to move out of home, grow a family, move to a school catchment area or marital breakups.

Add to these the “lockdown” effect where more people now want to move to ensure if this happens again they are in better surroundings, and a lack of available properties generally, then you have the foundations for a robust housing market despite some looming issues.

The house price rollercoaster many expect to see is therefore more likely to be a relatively tame ride rather than a screaming big-dipper.

Mortgage Market

Mortgage wise, lenders are still getting to grips with things but are doing so much quicker than many expected. Yes, there will still be a few delays in getting a physical valuation instructed but the queues are being worked on quickly. We are now seeing some lenders instructing valuations very quickly after receipt of an application once more.

One of the issues we are seeing is around 90% LTV mortgages, where those lenders in this market are being put under intense pressure. This has resulted in one putting rates up and another putting in a tranche management system which only allows them to do a certain amount of business at higher LTVs each day.

This should alleviate a touch as Bank of Ireland has now come back into this market and we await the re-entry of some other big lenders so normal service can be resumed.

Whatever happens to house prices, interest rates are still as cheap as can be with some exceptional deals still around and going nowhere any time soon. We remain of the opinion that it is as good a time as ever to buy and an excellent time to remortgage.

In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 1.14%, (3.20% APRC) and 5-year fixes from 1.39%, (2.80% APRC) whilst variable tracker rates are around from 1.24%, (3.80% APRC).

Those looking at Buy-To-Let can now obtain products from 1.19%, (4.55% APRC) for 2-year fixed or 5-year fixes are available from 1.62% (3.77% APRC).

For more information, speak to one of our friendly advisers.