by admin | Mar 12, 2021 | Mortgage News
The latest budget was, unsurprisingly, a lot more focussed on COVID19 than on the housing market. It is, however, also important for property professionals. Here’s a round-up of the key points.
An extension to the Stamp Duty holiday
Arguably it was almost inevitable that the chancellor would need to grant some sort of extension to the Stamp Duty holiday. After all, the logic behind this is, fundamentally, exactly the same as the logic behind the recent extension of the current Help to Buy scheme. The construction industry has been badly hit by COVID19 and now also has to deal with the full impact of Brexit.
This has resulted in delays both to the construction of new-build properties and to the legal completion process. Rather ironically, the Stamp Duty holiday may have exacerbated the latter problem by stimulating activity in the housing market.
With buyers facing the prospect of losing out on the Stamp Duty holiday through no fault of their own, arguably, the government had to act. If it hadn’t then, at best, it could have had a lot of upset buyers on its hands come election time. At worst, it could have led to buyers pulling out of sales due to being unable, or unwilling to pay the increased Stamp Duty.
What is interesting is that Rishi Sunak chose to extend the holiday until the end of June. Then there will be a further three months where the threshold is set at £250K. This means that even new entrants to the market could potentially benefit from it. It also means that there could be another “cliff-hanger” in three and then six months time.
Help for “Generation Buy”.
Back in October 2020, at the (virtual) Conservative party conference, Boris Johnson announced his intention to turn “generation rent” into “generation buy”. He indicated that the government would achieve this by introducing a scheme to guarantee mortgages of up to 95% of the property price.
Fast forward to March 2021 and the chancellor has now indicated what this means in practice. Essentially, the government is bringing back David Cameron’s Mortgage Guarantee scheme. Like the old scheme, it will be available to onward movers as well as first-time buyers. It will also be available on purchases of existing property. The current limit is set at £600K.
ISAs stay untouched
Given that the adult ISA limits have been the same since 2017, it was always highly unlikely that the chancellor was going to feel under any obligation to increase them. The one change was that the penalty for making irregular withdrawals from the Lifetime ISA will be going back up to 25% in April. It was temporarily reduced to 20% to help those affected by the pandemic.
The chancellor did announce the introduction of new NS&I “green bonds”. These are intended to help the UK meet its target of becoming carbon neutral by 2050. At present, it’s unclear whether or not these will have any direct impact on the housing market.
It is, however, worth noting that the government’s commitment to its “net-zero” target requires a switch to electric vehicles. This in turn requires the development of mass-scale charging infrastructure. Areas that get ahead of the curve here could see local house prices rise accordingly.
Widespread tax adjustments
The chancellor’s largesse on Stamp Duty has not extended to other personal taxes. Capital Gains Tax exemptions, Inheritance Tax and the Pensions Lifetime allowance all stay at 2020/2021 levels. The tax-free personal allowance and the higher-rate income tax threshold both stay at 2021/2022 levels.
At present, these freezes are scheduled to stay in place until 2025. This effectively means that people could find their take-home earnings eroded over time. In itself, this does not augur well for affordability. On the other hand, much will depend on how well the economy performs overall.
by admin | Jul 31, 2020 | Mortgage News
Prior to the lockdown, average house prices were predicted to rise by up to15% over the next five years. With COVID19 having sent the world into a tailspin, that might now be overly optimistic. It does, however, seem reasonable to expect the housing market to hold on and possibly even see growth. This is because the same positive factors still largely apply.
The “Brexit bounce”.
Houses are long-term purchases. There are lots of reasons for this, but most of them revolve around the fact that buying one usually involves a number of up-front costs and, it has to be said, corresponding administrative work.
This means that you generally want to be sure that you can stay in one for at least five years before you even contemplate a purchase, especially if you’re a first-time buyer and hence potentially qualify for special help.
Additionally, the fact that most buyers need mortgages means that they have to think carefully about their ability to service a mortgage over at least five years (which will be checked by a lender in any case).
For all of these reasons (and more), the extended delay over implementing the result of the Brexit referendum has really acted as a strong brake on the housing market. Hopefully, the fact that Brexit is now finally happening (regardless of your views on it), will allow both potential buyers and potential sellers to make plans in which they can have some degree of confidence.
Admittedly, this does depend on finding a post-COVID19 “new normal” but the signs are that this appears to be happening already. The lockdown is easing, businesses are reopening and while the economic situation remains challenging, there at least appears to be light at the end of the tunnel.
Significant investment in transport infrastructure
HS2 is, at the very least, delayed, and it will be interesting to see whether COVID19 will force the government to cancel it (or give them a face-saving reason to cancel it). Even if HS2 is cancelled, there is still very likely to be a focus on continuing to develop the infrastructure in the north of England. This will be partly for economic reasons (to encourage growth in the area) and partly for political ones (to hold on to electoral gains).
On that note, the expansion of Manchester Airport is already going ahead. In principle, the third runway at Heathrow should also go ahead, but there is always the possibility that this will be cancelled, possibly to placate those who are opposed to HS2 on cost and/or environmental grounds. Crossrail, however, is already underway.
Since none of these developments is complete (in fact neither HS2 nor the third runway at Heathrow are actually under construction yet), it’s impossible to say what specific benefits they will bring. It is, however, fair to say that improvements to infrastructure, especially transport infrastructure often lead to increased house prices along the route, particularly near to stops.
Economic stability (possibly growth)
The fact that the “Northern Irish issue” appears to have been resolved (or, at the very least, that there is a path to resolution), should hopefully make it much easier for there to be a smooth transition out of the EU.
It is probably fair to say that the EU’s desire to encourage members to remain in the block rather than going it alone will have to be balanced with a pragmatic approach to keeping trade flowing between the UK and the single market. It’s definitely fair to say that the UK has long traded on a global basis and hence should be able to continue to do so successfully. If this is the case and there is, at least, economic stability, then this is likely to have a positive impact on the housing market.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Jul 24, 2020 | Mortgage News
Non-essential businesses are now starting to reopen, albeit with safety measures in place to protect against COVID19. This includes the UK’s estate agents who can now take prospective buyers and renters to view potential new homes. Of course, this supposes that there is a supply of buyers and renters and a pool of new homes for them to see. It also supposes that buyers who need a mortgage will be able to get one.
The issue of demand
Given that everyone needs somewhere to live and not everyone can live with their parents (or in accommodation provided by their work), there is always some level of demand in the housing market. The real question is whether the demand will be for property to buy or property to rent.
When you buy a home, assume you either pay cash or use a repayment mortgage, you build up equity in an asset. This can be a powerful argument in favour of buying. The problem, however, is that if you need a mortgage, then you have to be confident that you can make the repayments or else you could risk losing your home. In fact, you could risk losing your home and still owing your lender money. You also risk having your credit record damaged and having to deal with the consequences of that.
When you rent, by contrast, you do not build up any equity in your home and there are consequences for missed payments, including, potentially damage to your credit record. On the other hand, you are only committed to a tenancy for the length of a lock-in period and even then it may be possible to negotiate an early release with your landlord. This can offer people much more room to manoeuvre if their circumstances change, financially or in any other way.
The issue of supply
On the home-sales side, supply depends on people being either forced or willing and able to leave their current homes. At present, it’s a very open question how much either reason will apply in a post-COVID19 market and the answer will probably depend largely on how well the UK weathers the post-lockdown financial reckoning (and Brexit).
If it can, at least, escape recession and keep the economy ticking over, then forced sales should be minimized and hopefully people will have the confidence to move home in line with their lifestyle changes (e.g. arrival/departure of children) and preferences. If, however, the UK enters a recession or even stagnates, then the number of forced sales may increase and potential home-sellers may choose, or be forced, to stay where they are, rather than risk a change.
The home-rentals side is slightly different as buy-to-let property is bought specifically as an investment, not a home. This means that the level of supply is likely to be determined by how well property compares to other investments, such as the stock market. There is, however, the potential for properties intended for short-term letting to be brought back into residential use (for example if travel restrictions make them uneconomical). There is also the possibility that there will be an increase in the number of people letting out rooms.
The mortgage market
In principle, the mortgage market is still operating to the rules imposed by the Mortgage Market Review. It remains to be seen, however, whether or not these rules will function in a post-COVID19 environment and, if not, what the government will do about it. Again, much is likely to depend on how well the UK performs economically over the foreseeable future.
If the economy performs at least reasonably well, then the government may feel that it can leave the housing market, and by extension the mortgage market, to get on with its own business. If, however, it does not, then some form of intervention may be necessary.
Your property may be repossessed if you do not keep up repayments on your mortgage.
The FCA does not regulate some forms of Buy to let mortgages.
by admin | Jul 10, 2020 | Mortgage News
When the Coronavirus hit, the housing market was forcibly brought to a halt. Now that restrictions are being lifted, it is starting to come back to life. This raises the question of whether it’s going to bounce back or whether there is going to be a housing market slump. This week’s Stamp Duty announcement will certainly play a large part in how the market develops.
Where now for the UK’s economy
Unless you can afford to pay cash for a property, your ability to buy one will depend on your ability to get a mortgage. If you want a mortgage, you will need to show your lender how you intend to repay it.
Unless you have a reliable income from sources other than work, this effectively means that your lender has to be happy that you have a decent chance of earning a living over the mortgage term. This starts with you having a decent chance of earning a living over the immediate future.
In short, therefore, the health of the UK’s housing market is likely to be closely tied to the overall health of the UK’s economy.
The economic impact of COVID19
On the one hand, it’s hard to describe the economic havoc wrought by COVID19. According to the Bank of England, the UK came close to insolvency. Some of the businesses which closed their doors to lockdown will never reopen them again. Admittedly, some of these closures might have happened regardless of the lockdown, but some of them might have survived.
It’s anyone’s guess how many more businesses will close and whether or not they would have survived if it hadn’t been for lockdown. Even if businesses do survive, they may be forced to cut back on their workforce. This will not necessarily mean redundancies. It could also mean steps such as cutting back on hiring, eliminating overtime or reducing hours for zero-hours workers or increasing the workload on in-house staff instead of hiring freelancers.
On the other hand, COVID19 has seen stories not just of businesses adapting to survive, but even succeeding in adverse circumstances. For example, according to research from Tamebay, UK SMEs actually increased their exports during the lockdown.
Non-essential businesses are starting to reopen and, where necessary, they are making adaptations to their business to ensure that staff and customers are protected from COVID19. Hopefully, these measures will not only prevent a resurgence of the virus but also serve as a form of protection against future pandemics.
Hopefully, therefore, the worst is now over and the UK can focus on moving down the path to economic recovery. If this is the case, then it is good news for the housing market.
The economic impact of Brexit
Only time will tell what impact Brexit will have on the UK’s economy. In this instance, however, businesses (and the public) have been given plenty of notice regarding the fact that it is going to happen (arguably four years worth of notice).
They also have at least some idea of the worst-case scenario, i.e. the UK leaves without a deal. This means that they have at least some opportunity to prepare for it, even if they are not happy about it. Hopefully, this means that any “transitional bumps” will be minor and short-term, at least in the general scale of the UK’s economy.
If this is the case, then the final arrival of Brexit may actually be a relief for the property market. Right now, people cannot know where Brexit will leave them. This means that they may not be confident committing to a major purchase, such as a new home. Getting clarity on what Brexit actually means in practice may put at least some people in a better position to make informed decisions on whether or not they are in a position to buy in the near future.
Your property may be repossessed if you do not keep up repayments on your mortgage.
by admin | Feb 8, 2020 | Equity News, Mortgage News
It looks like 2020 is shaping up to be an interesting year in all kinds of ways. Let’s take a look at what will or could happen and how that could impact the housing market.
Brexit has happened
This is now a given and regardless of your views on the matter, hopefully, everyone can appreciate the fact that there is now at least some degree of clarity on the way ahead. There should be even more clarity by the end of the year when trade deal negotiations should be concluded. The fact that people now at least know the general direction of travel with Brexit may help at least some people resolve housing-related dilemmas.
A trade deal may or may not happen
In principle, any and all trade negotiations should be concluded by 31st December 2020. Given that these negotiations could be highly complex, it’s far from out of the question that there will be an extension to this deadline as there was to the initial Brexit deadline. How long this will be is, of course, anyone’s guess, but the fact that the UK is due to have a general election in 2025 may help to focus negotiators’ minds.
The sooner a trade deal is negotiated (or the sooner it is confirmed that there will not be one), the sooner people will be able to have a really clear view of how the UK and the EU are going to interact with each other over the immediate future and what it means for them. This has clear implications for commerce and hence for employment and hence for the housing market.
A decision will be taken on HS2
The HS2 project is now under review and a decision could have major implications for the housing market in certain parts of the UK. If HS2 goes ahead and delivers the promised benefits, then, regardless of what happens with Brexit, it could massively stimulate the economy in the north of England.
Alternatively, if HS2 either doesn’t go ahead then the north would not see any benefits from it, but if some of the money budgeted for HS2 found its way to other infrastructure projects then it might benefit from those. This might also stimulate the housing market, just in a different way what HS2 should have delivered.
The final option is that HS2 goes ahead but does not deliver as promised, in which case the UK would essentially be stuck with paying for a very expensive white elephant. This would, of course, be the worst-case scenario, but if it did happen, it would not only have potential implications for the housing market, but also potential implications for the next UK election.
It’s unlikely that there will be an election before 2025
In principle, the fact that the government has a clear parliamentary majority means that it could overturn the Fixed-term Parliaments Act 2011 and call an election any time it wanted. In practice, while the government may choose to overturn the Fixed-term Parliaments Act 2011 to give itself more flexibility on the exact date on which the UK goes to the polls, at present, it’s hard to see any reason why it would be motivated to call an early election.
Admittedly life happens as does politics, so it can’t entirely be ruled out, but hopefully, the next five years will at least see stability in government and government policy. This could help to stabilise the Pound Sterling on the international currency markets and thus reduce economic volatility in general, be that in terms of employment, interest rates, inflation or the performance of the stock exchange. This could be of significant benefit to the housing market.
If you’re now thinking of moving, please contact us to see how we can help with your mortgage.
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