After the last year I am reluctant to make predictions and I’m absolutely not going to publish any graphs. However I can give opinions and after yesterday’s vaccination news we have reasons to be optimistic.
Interest Rates?
Since March 2020 those with lower deposits (5 to 15%) have been penalised. Most lenders withdrew altogether from he higher Loan to Value (LTV) market in March effectively putting a stop to the housing market. After the first lockdown though things opened up and picked up pretty rapidly, due in no small part to the stamp duty holiday brought in by Chancellor Rishi Sunak. However if you had a 5% deposit you were out of luck as no lenders were offering mortgages with that level of deposit. With a 10% deposit only a handful of lenders were in the market and rates were not as competitive as they were pre-pandemic.
Now in the first quarter of 2021 we can see a few more lenders in the 90% mortgage market, importantly some of these are the high street lenders such as Halifax. This means more competition and competition brings lower rates. Metro Bank have just knocked 0.6% off their 90% offering (five year fixed rate). The more lenders that enter the fray the better this will be for those looking for a 90% mortgage. Ultimately these are first time buyers, these are the very people who keep the market ticking over. Without a first time buyer at the bottom of the chain feeding the market the rest cannot move on.
Today (4th Feb) the Bank of England have held interest rates at 0.1%, the lowest in history. They also have said that rates would remain on hold until there was clear evidence of a sustainable recovery. This is good news for mortgage rates and lenders are continually tweaking their deals, today Nat West have announced some rate reductions across their range.
The Housing Market
As mentioned above last year the housing market ground to a halt for a while but really kicked on in the latter half of the year. House prices were rising and the market was buoyant. Early signs this year are that things have slowed down a little. Something that may boost the market again would be a change to the stamp duty legislation. The current stamp duty holiday ends on 31st March and there have been no talk of an extension as yet. Mr Sunak’s budget is on 3rd March so we will wait and see if anything is announced then. My feeling is that something does need to be done to keep that end of the market stimulated, if not a continuation of the current 0% up to £500,000 then perhaps a lower rate from £250,000 to £500,000 of, say, 1% so the maximum payable up to £500k would be £2500. I think that would not have a negative effect on the market and still generate income for the revenue.
Another factor is of course unemployment, with the end of furlough looming there is a really chance of significant unemployment later this year. This will have a knock on effect throughout the economy. The Bank of England are optimistic with their forecast of a “rapid recovery”. I hope they are right, my thoughts are that Mr Sunak needs to come up with some magic and that the nation needs to be confident enough to get out and spend in the knowledge lockdowns will be consigned to the history books.