07-01-2017

Fox Davidson Housing & Mortgage report, Quarter 4 2016.

Mortgages

It will be business as normal in 2017.

Mortgages remain available on both residential purchases and re-mortgages. We lost the help to buy guarantee scheme at the end of 2016. This scheme saw a host of lenders offering mortgages at 95% loan to value which were backed by government assurances. The 95% loan to value help to buy mortgages came with restrictions. One example was the rule that you could only own one property on completion. With lenders such as Halifax now offering the standard 95% loan to value mortgage those restrictions do not apply, under the standalone rules you can now purchase your new main residence on the 95% loan to value scheme and retain buy to lets in the background, subject to affordability. 2017 will bring new opportunities especially for those who previously fell foul of the help to buy rules.

Buy to let rules have now been implemented by most lenders and lending is now based on affordability rather than just the monthly expected rent. The buy to let mortgage market has become specialist again and getting advice from a whole of market broker will be almost essential to ensuring you secure the best terms with the right lender, first time.

Commercial finance is still widely available to those wishing to fund their own business premises or invest in a commercial investment property. High street banks are still most competitive but tend to only lend on standard ‘vanilla’ property and for commercial investments they will want long term established commercial tenancies in place, ideally with blue chip companies. The mortgage will also have to be repaid on a capital and interest basis. For any quirky commercial properties or interest only lending then the challenger banks are geared up for another busy year of lending.

Maximum loan to values are 80% on buy to let, 95% for residential mortgages and 80% for commercial finance.

House Prices

According to the Nationwide House price index report for December 2016 the average UK house is now worth £205,898 with an increase of 4.5% in 2016.

Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:

“The story of UK house price growth in 2016 was one of relative stability. Annual house price growth ended 2016 at 4.5%, the same as the rate recorded in 2015.“

“There were signs that London’s significant period of outperformance may be drawing to a close. For the first year since 2008, annual house price growth in the capital was lower than the UK average, with prices increasing by 3.7% over the year, down from 12.2% in 2015.”

Nationwide expects house price growth of 2% in 2017.

Halifax predicts house price growth of 1% to 4% in 2017. Their December 2016 report states:

  • Slower economic growth, pressure on employment and a squeeze on spending power, together with affordability constraints, are expected to reduce housing demand during 2017.
  • Nonetheless, UK house prices should continue to be supported by an ongoing shortage of property for sale, low levels of house building and exceptionally low interest rates.
  • Overall, annual house price growth nationally is most likely expected to slow to 1-4% by the end of 2017. The relatively wide range for the forecast reflects the higher than normal degree of uncertainty regarding the prospects for the UK economy next year.

Interest Rates

It looks likely that rates will remain at 0.25% for the whole of 2017. Some predictions state no change until 2019. Inflation will increase this year but the Bank of England has stated that inflationary pressures will not be sufficient to increase interest rates, other factors such as economic growth, levels of unsecured personal debt and wage levels will be a big consideration. Mark Carney, the Governor of the Bank of England has stated “The big thing that’s happened in the British economy since Brexit is that people have got on with their lives. Thank goodness.”

“Increasingly they’ve got on with their lives thanks to consumer credit, which is another issue.”

Long term swap rates have been increasing steadily and we could have seen the lowest rates for 10 year fixes pass us by. Regardless, it remains a great time to secure cheap money.

Conclusion.

2017 is a year of unknowns and any predictions made by anyone, anywhere should be taken with a pinch of salt. The Brexit and Trump effects are still unknown and as 2016 has taught us, anything is possible.

What is a certainty is that banks wish to lend and funding remains widely available, even for those with poor credit and little deposit. It is very much business as usual.