mortgage news July 2021
+ Will the property pandemic bubble burst? This question has become increasingly prevalent over recent months and is a reflection of two things: the significant uptick in both house prices plus transactional activity since the introduction of the stamp duty holiday in July 2020.
undeniable, unrelenting rise in prices. Nearly half of all mortgage lending made in the first three months of this year went to home movers, according to the Financial Conduct Authority (FCA), the highest share since records began.
Demand for property has pushed average house prices up 10.9% over the past year, the fastest pace for almost seven years, according to the Nationwide Building Society. Prices rose on average by 1.8% in May, after a 2.3% rise in April, according to the figures, pushing the annual rate of increase up from 7.1% a month earlier. Is this growth sustainable? Almost certainly not. However, that is not to say prices will come tumbling down.
Around 42% of mortgage lending was advanced to home movers, the FCA said, up 15% from the same period last year, and almost double the share advanced to first time buyers. Home mover demand is thought to be driven by changing priorities as a result of the pandemic, with many people looking for bigger homes and more outside space.
What could happen? Some are expecting a market correction or even a crash. Indeed, the end of the stamp duty holiday – currently set to taper down from July 1 before the tax returns to normal levels from October 1 – has been earmarked as a potential trigger for this event, just as its introduction helped to spark the current boom in the first place. It seems likely that the steady return to the stamp duty status quo will go some way to stabilising the market. It will almost certainly dampen the huge levels of demand currently experienced from buyers, sellers and investors, although perhaps not to such an extent that prices enter into a downward spiral. After all, it would be foolish to pretend that the current buoyancy of the UK property market is purely the result of the tax savings on offer. That has helped to unlock the near-constant demand that exists among people who want to invest in bricks and mortar. The prevailing economic uncertainty that has lingered in the UK since 2016 has played a part in driving this demand. Indeed, since June 2016, the country has had three Prime Ministers, two general elections, the fallout from the EU referendum, the formal Brexit process, and of course, the Covid-19 pandemic. In such turbulent times, people tend to gravitate towards so-called ‘safe haven’ assets, and in the UK, real estate falls under that bracket. This attitude is not surprising when we consider the long-term performance of bricks and mortar as an asset. According to Land Registry data, the average UK house price rose from £50,000 in 1990 to £250,000 in 2020. Growth might slow or stagnate, but historic data shows us the Medical Family Finance News July 2021
What next for the property market? The UK housing market requires close attention – there are many ‘boogeymen’ in the background and they have been lurking for quite some time; the rising rate of inflation, possible interest rate rise, will house prices fall? What impact will mortgage payment holidays have when they and the furlough scheme come to an end this year? We are arriving at an interesting crossroads for the property market. One thing is for sure and we have seen that since the pandemic, the government will do everything in its power to make sure the housing market does not crash. The impact on banks and the wider economy would be significant and it is safe to think that there is likely to be further schemes and measures to support the market. There is a very clear supply issue which will keep prices from falling. This is clearly inhibiting many people from getting onto or moving up the property ladder and this is the issue that the government and policy makers need to address. The UK government has demonstrated their stance and support to the housing market – the stamp duty holiday is proof of that. The benefit of stimulating the housing market can be felt across other sectors too; estate agents, conveyancing firms, moving companies, household goods etc. The property industry is also being incentivised by lenders and government alike as the mortgage guarantee schemes were reintroduced and 95% products came back into the market. There is also a commitment to more new build developments by reforming planning systems. The government has now launched their ‘First Homes’ scheme which will help local first-time buyers (many of whom will be key workers like NHS staff and veterans) onto the property ladder by offering homes at a discount of at least 30% compared to the market price.
+ Will the property pandemic bubble burst?: continued The recent Queen’s Speech made prominent mention of the government’s plans to dramatically overhaul the UK planning system; add to that the tapering down of the stamp duty holiday and the hopeful transition out of pandemic restrictions and it will be fascinating to see how the real estate sector progresses.
The pandemic has uprooted the fabric of society and forced governments, consumers, investors and businesses to rethink how they operate. Going forward, we need to consider creative ideas to ensure the real estate industry is placed in the best possible position for stable, sustainable progress.
+ Do you know what mortgage rate and product you have? Estimates suggest that well over one million borrowers have lapsed onto their lender’s default standard variable rate (SVR). Has this happened to you? If so, now could be the perfect time to consider a remortgage to get your finances in good shape for the year ahead. If your current mortgage deal has ended, you could be switched onto your lender’s SVR and pay way over the odds, perhaps without realising. Research shows that borrowers on an SVR could save an average of £1,602 a year or over £133 every month. Even with a potentially sizeable saving to be made by remortgaging, it’s surprising how many people stick with their SVR. Here are some of the most common reasons: “I didn’t realise my mortgage deal had ended” – your lender should let you know, but always remember to make a note of the end date of a new mortgage deal so you do not forget.
“My lender contacted me, but I didn’t understand” – mortgage jargon can be confusing, but it pays to check out important mortgage correspondence. “It’s too much hard work to find a new deal” – it is true that the mortgage market can be bewildering with many deals to choose from. That is where we can get involved – to help find you a suitable deal. Are you still covered? If you are thinking of changing your mortgage, remember to review your protection policies at the same time – especially if you do not already have cover in place, or your circumstances have changed since you last reviewed your cover. To discuss your remortgaging options and to see if you could save money, please get in touch.
+ Team Update: Beulah Antonin – Mortgage and Protection Adviser Beulah has been advising clients since 2017 and leads our mortgage team.
achieve their property goals; whether that is as a first-time buyer, a portfolio landlord or helping clients use their assets to support their family to buy property. I just enjoy finding solutions for clients.
How did you get into financial services? I graduated in economics and politics at the University of Sussex (many years ago!). I have always been interested in investments, financial markets and the property world. After maternity leave with my second child, I decided I wanted to reconnect with my interests and become a mortgage adviser.
What do you enjoy outside of work? I have 3 children so they keep my diary full. I’m a big foodie – I enjoy cooking and am a keen baker. We love cycling, walking and finding nice places to eat! When we aren’t locked up; travelling is a big love of mine along with music and writing.
What do you enjoy most about your job? I get a real buzz out of meeting new people and helping them
What next for the property market? The UK market has been incredibly resilient, and the government is clearly keen to support the market in as many ways as possible. We are a nation obsessed with home ownership and that should keep the market turning even when the stamp duty holiday tapers down.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
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