I hope everyone has recovered from the jubilation of Saturday night!
I have 2 daughters, and I had to explain to my elder one, who is 8, that it isn’t normally like this! She has grown up at a time of the England football team getting to the Semi’s of the last 2 major tournaments (which I don’t think we have ever done consecutively before), endless gold medals at Olympics, British football teams winning the Champions League, Rugby teams winning the Champions Cup, the Cricket team winning world cups and a hoard of boxing world champions… It’s a far cry of the dark days of the 80’s that I remember when I was her age, watching Steve Davis win the snooker was as good as it got for me! (who I actually met at a function a few years back, and what a lovely chap he is).
A very different era indeed and I am really glad they won’t have the lifetime of waiting I have had for England to win their first tournament since 1966… can we start to dream…?
It’s also been a whirlwind week in the mortgage and property world, so here is a round up of the main points you need to know:
Inflation could top 4% this year affecting the mortgage and property world
Last week, outgoing MPC (Monetary Policy Committee) member of the Bank of England, Andy Haldane said “By the end of this year, I expect UK inflation to be nearer 4% than 3%”, he said, adding that “everyone would lose” with this outcome.
The remarks were aimed at the current policy of keeping their benchmark rate at a historic low of 0.1%. He clearly favours a rise sooner rather than later as he also does not feel this inflation spike is “transitory” but could be the start of a prolonged period of higher than expected inflation.
This is going to cause some serious head scratching at the Bank of England. If they raise rates or remove stimulus too soon, you can kill off an economic bounce back. Leave it too long, and long term inflation will sap both the public and personal finances, potentially affecting the the mortgage and property world. All of a sudden, taking a penalty against Germany looks more tempting than trying to solve this puzzle…
House Price Rises Outweigh Stamp Duty Saving
Research from MIAC Property Analytics believes that house price rises have outstripped the saving offered on Stamp Duty. MIAC research looked at Land Registry data over the last four years to compare house prices between last June and April 2021 to study the impact of the tax relief on house prices.
It says, “every region in the UK has experienced a rise in average sold property prices irrespective of the ‘saving’ made from the Stamp Duty holiday”. The report adds Yorkshire and the Humber was the second biggest loser, with a home costing on average 3.3% more in April.
The East Midlands was third with a property costing 3.1% more, with London next with a 2.9% average price rise. However, when the survey drilled down into smaller districts, it did find “Stamp Duty winners”.
Buyers in Hammersmith and Fulham made the greatest saving, with a Stamp Duty reduction of £14,680 allowing them to save £8,272, despite average house prices in the area rising from £784,460 last June to £790,867 in April.
By contrast, homebuyers in Westminster saw the biggest price hike, paying £138,316 more on average. The average terraced house in Westminster sold for £3,994,547 in April – £243,911 more than ten months before despite buyers saving £15,000 on Stamp Duty.
Mortgage Rates Down, LTV’s Up
Last week TMW (The Mortgage Works), the Buy To Let arm of Nationwide Building Society, has increased it’s maximum LTV (Loan To Value) to 80%, meaning it is now possible to buy an investment property, or refinance one, to 80% of it’s value for the first time with a mainstream lender since the onset of the pandemic. There are still quite tough affordability rules to meet, but yet more encouraging signs of things getting back to ‘normal’.
Bang on cue, when I said last week that the best mortgage rates can’t get much lower, they get lower… TSB have undercut Platform’s 2 year fixed rate, to 0.94% (whereas Platform are at 0.95%). It is for remortgage only, so the Platform deal remains the best for a house purchase, but as touched on above, I don’t feel these rock bottom rates will last much longer...
We are starting to see a clearer upward trajectory on market rates now, and as touched on in detail above, that means we could well be at the lowest point of this current cycle on the best mortgage rates.
Therefore, in the mortgage and property world, our default position stands, unless you have any specific needs, we would most likely recommend a longer term fixed rate if you have a 25% + deposit, but keep it short term or flexible if less than that figure.
In the last week:
3 Month Sterling Libor = down 0.006% at 0.075%
2 Year SWAP = up by 0.013% at 0.408%
5 Year SWAP = down by 0.024% to 0.727%
Bank of England Base Rate = Held at 0.10%
Best Rates for the mortgage and property world
2 Year Variable from 0.99%
2 Year Fixed Rates from 0.94%
5 Year Fixed Rates from 1.14%
BTL Rates from 1.19%
The actual rate you will be offered will be dependent on your personal circumstance and deposit level. Please speak to one of our advisers so that they can guide you through this process
Source: Twenty7Tec June 2021
Please do contact one of The Team for further advice.