There’s no doubt that lockdown has been a time of great stress and worry for many people as fears over finances, job security and, most important of all, the health of loved ones added up to create the most uncertain of times in recent memory.
There is no doubt, too, that the country, like the rest of the world, is headed for recession. The latest aggregated forecast for the UK published by the Treasury this week suggests the economy shrank by around 9% during June and July.
It seems a reasonably safe bet, then, that as a whole the country is headed for some economic turbulence and recent announcements by the likes of John Lewis, Boots and British Airways have indicated the volatility of employment.
Yet whilst there are plenty of commentators talking about a deep and lasting recession, the Treasury’s aggregated figures – the same document in the link above and an amalgam of nine independent forecasts from respected sources – suggests that next year the UK economy will grow by between 6 and 7 percent, more or less negating the economic impact of coronavirus in 2020.
Further, the Bank of England has already publicly stated that the recession will be less acute than first feared. Recent studies by the Economic Research Council suggests that recessions do not impact evenly across society.
Broadly speaking, it concludes that those with mortgages and a secure income may find the impact less severe than those in lower paid jobs and therefore less well off.
All that said, the fact remains that if you’re lucky enough to be in a secure job in a key sector or industry and are confident that your finances and income are robust, then now could well be the best time in recent memory to make a move.
Interest rates are at an all-time low, with the Bank of England base rate currently sitting at 0.1%. Although lenders haven’t passed the benefits of that rate in their entirety to borrowers, it does mean there are some extraordinarily good mortgage products available.
That makes for an attractive proposition now, but some analysts, such as Trading Economics, are predicting that the base rate will remain at 0.1% for the remainder of this year and all of next, and even in 2022 is only likely to rise to 0.5%.
With many lenders offering 5- and 10-year fixed-rate mortgage products, prospective buyers have the confidence of certainty over repayments for many years to come – giving the economy time to recover some lost ground – as well as knowing the fiscal measures that will protect borrowers are likely to be in place for some time to come.
Stamp Duty Holiday
The decision by the Chancellor, Rishi Sunak, to raise the threshold at which buyers are liable for Stamp Duty (or Stamp Duty Land Tax, or SDLT) to £500,000 has been a welcome shot in the arm for the housing market.
Those buying a property for £500,000 or more will save £15,000 in government taxes – equating to somewhere approaching half the average cost of moving into a property valued at between £600,000 and £750,000.
The scheme runs until March 31st 2021, giving buyers an eight-month window of opportunity to add real cash to their moving budget, or reduce the size of their prospective borrowing.
It does come with one potential downside, though – knowing buyers have more cash to play with may mean sellers are more likely to hold out for a better offer than might have been the case previously.
Pent Up Demand
The months of lockdown have created a backlog of demand for properties among people who were ready to move when the crisis hit but who have been unable to progress their search for a property or, if they had agreed a sale or purchase, move the transaction forward.
Recent reports suggest that demand for properties in the residential sales sector was 46% higher in May than it had been in March before the country went into lockdown.
Lockdown has influenced the housing market in other ways, too, with months of being restricted to our homes fuelling appreciation for properties with outdoor space. Some agents are reporting that a property’s garden is now a greater selling point than its kitchen, which has traditionally been a key room for prospective buyers.
The lending landscape is a difficult one to call. On the one hand, lenders will be looking even more closely at affordability now than they were prior to the coronavirus crisis. Certainly, applications from those working in the most badly affected sectors, such as hospitality and entertainment, will likely bear more scrutiny than they might have done previously.
However, the slump in mortgage applications that has been the inevitable consequence of the property sector being suspended means there is increased competition for business from banks and building societies.
With proven affordability and a financial situation that inspires confidence, it may be that you’ll get access to a better range of products from a wider range of lenders.
Increased competition may also translate into reduced costs in other areas, such as conveyancing, removals and so on.
If you’re in a position to move or you’ve been thinking about your next step on the property ladder, come and talk to our friendly team to discover your options.
Oportfolio Limited is an appointed representative of Primis Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority
Your property may be repossessed if you do not keep up repayments on your mortgage.
Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.