There have been mixed signals from the residential property market in recent months. Signs of increased activity emerged in January and February, but this was partly attributed to the stamp duty holiday for first-time buyers of property priced up to £250,000, which ended on 24th March. Then, in mid-March, the Government announced plans for a scheme to facilitate 95% mortgages for suitable buyers of brand new homes.
Many politicians and economists see a more vigorous property market as key to future growth and prosperity in the UK. Not only would more house building create jobs in the construction industry and its supply chain, it could generate wider property market activity that could help boost consumer spending on home furnishings and other major household items.
One interesting fact about property market trends is that, according to the National Housing Federation, the ratio of owner-occupied homes in Britain has been falling for the past decade and may continue to do so. ‘Right to buy’, mortgage interest relief and rising affluence fuelled the booms of the 1970s and ’80s. Now, first-timers struggle to raise the deposit needed get them onto the ladder, forcing many to rent, which in turn stimulates the buy-to-let market.
Mortgage availability and cost
The future course of house prices remains uncertain and the subject of much expert debate. Regional variations seen in the past are likely to be a continuing feature. Overall, though, one big factor will be mortgages – their availability and their cost. The post-recession era of low official interest rates has helped many homeowners, but not all mortgage rates are linked directly to Bank of England base rate. As beleaguered banks struggle to recapitalise, they hope to squeeze higher margins from their depositors and borrowers.
The potential for widespread increases in the major lenders’ standard variable rate (SVR) became apparent when one of the very largest announced in early March that its SVR cap would rise from 3.5% to 3.99% with effect from 1 May. Two other banks then pushed their SVR up from 4.59% to 4.95%. Other lenders announced rate rises between 0.25% and 1%.
Whilst few people expect a rise in the 0.5% base rate any time soon, mortgage lenders seem to have ideas of their own on setting rates that don’t track the official level. Nobody can be sure, but it seems the only way is up – which makes Spring 2012 an ideal time to secure a new mortgage deal, with the benefit of professional advice.