Annoying the French, house prices & net mortgage borrowing
Before we get onto house prices and how net mortgage borrowing has more than doubled…more on annoying the French.
Perhaps this reflects badly on me, but there seems to be something deeply satisfying having a spat with the French.
Don’t get me wrong, I was an ardent remainer and I still think Brexit was an awful idea that was poorly executed, but sadly I am old enough to remember changing Sterling into Francs and blaming the French for just about anything we could get away with. Since the formation of the Eurozone and a near love in with other EU countries for a very long time since our Island mentality had been put on the back burner for a good while. While this is all over a rather inconsequential argument over fishing licenses, I suspect this is a window into our future of butting heads with our continental neighbours.
Funnily enough, that coincides with a lot of old themes resurfacing in the mortgage world this week, so let’s look at that in more detail:
Record year for housing sales set to continue into 2022: Zoopla
Zoopla, one of the main property portals in the UK believes the UK is on track to have the greatest year of house price growth since 2007, and that trend doesn’t look like it will reverse in 2022.
It’s the same old story of a large imbalance of a shortage of sellers vs the number of buyers there are in the market right now. That is driving the housing market to run at 30% above the 5 year average of transactions. Activity this year looks set to reach £473bn in transactions, up £95bn on last year, with total sales set to hit 1.5m.
House price growth looks set to continue into 2022, with their prediction of 3% next year, but London to still remain sluggish at 2% growth. I would take that with a pinch of salt as house prices were predicted to go down by up to 10% as the pandemic hit, but instead, we have seen double-digit growth. The uptick in activity has just highlighted the long term issue we have in that – we haven’t built enough, or the right type, of homes for the last 30 years – so while we may not see double-digit growth again next year, it does look like above-inflation growth is highly likely. While wages are picking up, they can never fully keep pace with an already inflated market, so the smart movers will be the ones doing so as early as possible.
Net mortgage borrowing more than doubles in September: BoE
As the last stamp duty holiday ended in September, that prompted a big increase in net lending. We saw £9.5bn in September, which is significantly up on the £4.4bn in August. We also saw gross lending ‘increase sharply’ from £20.9bn to 30.7bn.
While the stamp duty deadline was a factor, we have also seen a significant increase in people remortgaging to lock into long-term fixed rates as the widely tipped rise in interest rates looks set to happen before year-end.
As detailed above, you have a double push factor now driving the market – rising mortgage rates and rising property prices – so while we will no doubt see the annual slow down over the festive period, we are set to be busy right up to Santa’s arrival and picking up in January in the same vein.
As I mentioned last week, there wasn’t much expectation of anything exciting in the budget from a property/mortgage perspective, and that turned out to be the case.
What we do have to look forward to is a tax regime that is the heaviest since the 1950s, where working families will feel the brunt of that. That is very much me and pretty much anyone reading this email so unless we see an uptick in GDP the likes of which we have never seen, we can look forward to the next 5-10 years of tax grabs and a squeeze on incomes.
Money Markets continue their march upwards, which is now filtering through into higher mortgage rates.
Last week, Rishi Sunak, wrote to the Bank of England to lend his support to a base rate rise. As you can see on the 3-month Libor rate, that is now firmly at 0.25%, which suggests the base rate will go back to that level this year, so the only debate is does that happen this Thursday when the Bank of England meet, or in December? I bet a colleague that it will be in November, but with inflation dipping to 3.1% last month unexpectedly, that is now a 50/50 call.
Therefore, our default position stands, unless you have any specific needs, we would most likely recommend a longer-term fixed rate if you have a 25% + deposit/equity, but keep it short term or flexible if less than that figure.
In the last week:
3 Month Sterling = up by 0.039 at 0.250%
2 Year SWAP = up by 0.124% at 1.238%
5 Year SWAP = up by 0.040% to 1.264%
Bank of England Base Rate = Held at 0.10%
2 Year Variable from 0.51%
2 Year Fixed Rates from 0.74%
5 Year Fixed Rates from 0.89%
BTL Rates from 0.99%
The actual rate you will be offered will be dependent on your personal circumstance and deposit level.
Please speak to one of our London Mortgage Broker advisers if you have any questions about the implications of increases in net mortgage borrowing, house prices, or the recent budget. They can guide you through the potential change in the likely BoE interest rate, the best mortgage loan and best interest rate for you, or help you with your large mortgage lending. We are one of the highest-rated London mortgage brokers on Google.
Source: Twenty7Tec October 2021
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