December Newsletter

Merry Christmas and season’s greetings from all the team at Clarity!

Let’s send the year out with a bang and look at the big highlights in the mortgage market in 2017.

Foremost – certainly in terms of newspaper headlines –  we had the first Bank of England Base Rate rise in a decade.  Many of you will have observed endless speculation of a rise by all sorts of experts pretty much every 2-3 months since 2010.  I guess all these “economic forecasters” can sleep soundly, knowing they eventually called it right – and it only took 10 years! In fact, the Bank of England Base Rate is exactly what it was in July 2007, since it was dropped by 0.25% twelve months ago and the recent rise just reversed last year’s cut.

More importantly, in the real world of our customers monthly budget, this rise in Base Rate will have a pretty insignificant effect on most households (and none at all on those on a fixed rate deal).  Of course, that might change in the future with further Base Rate movements, but we won’t be joining the ranks of the economic forecasters anytime soon, even though that does look like an easy gig at times!

If the prospect of Base Rate fluctuations worries you, and you are not a fixed rate deal, you can always give us a call.  That’s what we are here for.

Dramatic headlines aside, here are two less publicised trends which emerged in 2017 and which we believe will have a much more profound effect on the future mortgage market; specifically, buy-to-let (BTL) challenges and mortgage lender competition.

Whether or not you are BTL investor, you will still have an interest in events and trends which shape the whole housing market and BTL has provided a major stimulus to the UK housing market for much of the last twenty years.  In a recent paper commissioned by Shawbrook Bank, and researched the Centre of Economics and Business Research, Karen Bennet (MD Commercial Mortgages) says:

“There has been an unprecedented raft of interventions in the BTL market for investors to digest. Some have already had a pronounced affect, with the stamp duty levy evidently impacting purchase activity amongst landlords.”

She goes on to point out:

“Further ahead we have the impact of the changes to interest tax relief, and many fear this will only become real for landlords once their tax returns are actually calculated and the tax payments are due.”

The BTL market is facing challenges on an unprecedented scale, with the very real possibility of a measurable effect on the entire UK housing market.

As far as mortgage product availability is concerned, I pose the question: have we ever had it better?

Leaving aside the current low cost of borrowing, competition in the mortgage market can only be fantastic news for you, the borrower.  Competition does much more than just keep borrowing costs as low as they can be, it forces lenders to constantly innovate their product range.

We believe this competition and product innovation (especially where first time buyers and the bank of mum and dad are concerned!) will accelerate in 2018 and we look forward to many new and inventive mortgage products arriving in the market place next year.

If we now put these two trends together: the potential for more of the low-cost, affordable housing stock coming back to the residential market, plus constant mortgage product innovation, especially targeted at the bank of mum and dad, and first-time buyers, we envisage opportunities for many of our clients to help their “wee bairns” onto the housing ladder in 2018!

Now that’s an exciting prospect to take into the New Year!

Best

Alan

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