31 Aug Scottish Property Market Round-Up 2018 To Date
Summer 2018 has seen great weather, with an extended heatwave like we’ve not seen for years, as well as an exciting football world cup in Russia, and much turmoil in the world of politics…but what’s been happening in the property market? We take a look at the changes that have happened and what has had the biggest impact on UK housing over the summer.
At the start of August, after much speculation, the Bank of England increased interest rates from 0.5% to 0.75%. This is only the second rise in over a decade. Despite Brexit uncertainty and apprehensions over inflation, strong employment levels, greater consumer spending, the prospect of wage rises and predictions for a strengthening economy gave the Bank’s Monetary Policy Committee (MPC) the confidence to act.
The changes mean that 3.5 million people on variable or tracker mortgages now face higher monthly repayments – though, in most cases, only up by slightly more than what they were paying before.
The majority of first-time borrowers, who are typically on fixed-rate deals won’t be affected by the rise and fall of interest rates and subsequently won’t see any change in their mortgage costs.
Mark Carney, The Governor of the Bank of England talked about further increases in the future but said that they would be gradual and limited. Financial markets expect two further rises, of 0.25% each time, in 2019 and 2020, bringing the base rate to 1.25% by 2020. A return to interest rates of 5% or higher, a familiar position before the global financial crisis took hold in 2008, though it is thought highly unlikely.
People who are looking to re-mortgage are still being encouraged to act, to lock in favourable deals before interest rates rise again in the next couple of years.
Higher Than Average House Prices
The average house prices increased in July, leading to the average home in the UK costing a new record high of £230,280, according to Halifax. The annual rate of growth grew from 1.8% in June to 3.3% in July, while prices went up by 1.4% on a monthly basis.
Managing director at Halifax However, Russell Galley, advised that despite the improved quarterly and annual rates of house price growth, housing activity remained weak. On the upside, the labour market remained strong, with the number of people in employment increasing by 137,000 from March to May and pressures on household finances eased as average wages continued to rise at a faster rate than consumer prices.
He also stated that the Bank of England’s interest rate rise was unlikely to have a significant impact on either mortgage affordability or transaction volumes.
Stamp Duty – First Time Buyer Confusion
The headline finding from research carried out by online broker L&C Mortgages was ‘Some 31% of first-time home buyers don’t know if the stamp duty abolition announced in the last Budget will help them when they purchase their first home’. It also revealed that 13% of buyers thought they would save more than £5,000 under the new rules.
Most English first-time buyers think that the government need to go further with stamp duty cuts, with 62% arguing that stamp duty should be scrapped for all first-time purchasers regardless of the cost of the property they are buying.
Second Steppers Rely on Support from Friends and Family
According to research carried out by Lloyds Bank, many first homeowners looking to trade up to a bigger property have to rely on financial aid from family and friends, with one third requiring assistance from this source.
Second steppers expect to borrow an average of £25,450 to make the trade up. In most cases, this comes after turning to friends and family for financial support for their first home to the tune of nearly £20,000.
Parents of second steppers said they will dip into their own savings to help their offspring, while approximately 40% plan to re-mortgage.
As a result of these challenges, around 28% of second steppers now plan to have fewer children than originally planned, this is up by 16% since a similar survey last year.
Retirement Market Set to Rocket
Data from Knight Frank suggests that the private retirement property market is estimated to reach a value of £44 billion by 2022, reflecting a 50 per cent increase in just four years.
In the same time frame. The number of private retirement living units is also forecast to increase by almost 30 per cent.
This might help those eager to downsize in their retirement years, who have in the past have struggled due to the shortage of appropriate housing stock.
Currently, there are more than 720,000 retirement units in the UK, but a large portion of this (75%) is social housing. This is changing, though, with private development now making up an average 54% of all new units delivered annually since 2000. This is set to rise to 78% annually by 2022.
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