Uncertainty around the UK housing and mortgage markets has been widespread among first-time homebuyers.
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Mortgage products have been withdrawn, payments doubled, and lenders are backing agreed deals; Concern and uncertainty among Britons trying to buy a home spiked last month after Finance Minister Kwasi Kwarteng announced his “small budget”.
His controversial plan predicts quick tax cuts and looser rules and regulations for businesses. While the cost of living crisis in the UK continues, Kwarteng thinks his budget will spur growth. Critics say that it will mainly help the rich and make the UK more unequal.
Small budgets have had a positive for those trying to buy a home: Stamp tax, a tax many buyers pay when buying a property, has been reduced.
Stamp tax cut
Only those with properties worth more than a certain threshold pay stamp duty, and for first-time buyers it has been set at above the average UK property price before the small budget came into effect. As a result, the changes don’t have much of an impact on first-time buyers.
Paresh Raja, CEO of financial services firm Market Financial Solutions, explains: “While the cuts will benefit some buyers, any gains could be written off. by other additional costs.
“The reduction of stamp duty […] will definitely help. Unfortunately, several other factors are simultaneously making their lives harder: inflation, interest rates, and mortgage market disruptions,” he told CNBC Make It.
Francis Gill, a financial advisor with London-based financial firm Humboldt, has a similar view.
“For those who are very close to affording a purchase, but still save on stamp duty costs, this is a win and they will be able to give their purchase date. However, what they have saved. be on SDLT [stamp duty] He said:
So what about mortgage rates?
The housing and mortgage sectors have been particularly affected, with Lenders pull hundreds of mortgage deals or price them much higher after government bond yields and Bank of England rate expectations both rose. This increases the cost for borrowers as the BOE prime rate helps to price all types of loans and mortgages in the UK.
According to Moneyfacts data, the average interest rate on a 2-year fixed mortgage surpassed 6% this week – up from 2.25% just a year ago. Nicholas Mendes, a mortgage engineering manager at mortgage broker and advisor John Charcol, believes this could go even further.
“Given rising lending costs, volatile economic outlook, and future growth in factoring and interest rates, we are likely to see interest rates averaging 7% over the course of the year,” he said. new”.
Many borrowers and prospective borrowers were concerned that they would not be able to repay their mortgage, a figure that has more than doubled in thousands of cases. As a result, research and expert advice are key for anyone looking for a mortgage right now, Gill explains.
“Make sure your credit score is accurately reflected, make sure they talk to an independent broker, consider a fix over a {…]period, and review any Repayment Fees. Soon,” he suggested.
“It’s important to talk to someone who can expertly analyze their situation. Really, really consider whether the rate will be this high in two-thirds of a year, (although But they may be looking at fixing) whether a mortgage is viable,” he added.
The market is heading for a tough 12 months
Nicholas Mendes
Mortgage Technical Manager at John Charcol
What’s next for the housing market?
The markets are expecting a “tough 12 months,” Mendes explained. Lenders could raise rates further and mortgage prime rates could rise, while an economic downturn and the cost of living crisis could put pressure on homeowners, he said.
But all may not be doom and gloom as next year begins.
Mendes explained: “Real estate prices are expected to decline in 2023, likewise, we expect interest rates to fall slightly from current highs.
Raja believes the market could be stable, or at least less roller coaster than it was two weeks ago. “The lending market will calm down after this particularly turbulent period,” he said.
This should at least alleviate some of the uncertainty that homeowners are currently facing.
Gill points out that for those trying to climb the wealth ladder, the chaos may even present some silverware in the long term as others are forced out of the property market.
“There could be an opportunity if a lot of buy2let homeowners leave the market, as there’s a huge amount of property for sale and prices drop, they can now really climb the ladder,” he believes.
