The summer slowdown might not be as marked as many anticipate given that large numbers of completions take place, particularly as families move into new homes prior to the new school year, and coupled with the ongoing level of remortgage activity, it may prove to be the start of an end-of-year uptick.
The big moment – or rather non-moment – last month was of course the results from the Monetary Policy Committee which once again voted to keep Base Rate on hold, with an even more decisive result than in June. The talk in-between about June’s close result being the signal for an impending rate increase did not materialise, although the Bank was keen to stress that a rise within the next 12 months should be anticipated.
When push comes to shove however, will the Bank want to upset the apple cart particularly if the Brexit negotiations continue to mean a wilting confidence level amongst both homeowners and those who want to get on the ladder? It might simply prefer to keep things stable for the next two years as the negotiations unfold, especially given the level of upheaval that leaving the EU is going to engender anyway.
Anyone who professes to know how Base Rate might change during the next 12 months is either very wise or very foolish, because you get the sense that even Bank of England employees are unsure. Listen to different speeches from different MPC members and you will understand just how diverse those opinions are, and given this backdrop, then all concerned might think it’s better to stick with the status quo, rather than move BBR in an upward direction. Certainly, inflation levels don’t appear to justify an increase and therefore it appears that rates will not be moving in the short-term.
So, what does this mean for agents, advisers and clients? Well, it does give that level of certainty around rates and given the intense competition across the mortgage market – particularly for remortgaging – then this appears to be a very good time to make a mortgage move. For those who are fortunate enough to have significant levels of equity – say 40% plus – then it’s possible to get very close to 1% two-year fixed rates, while even those up at 75% LTV are also going to find real value, especially if they are currently sitting on an SVR of 3/4/5%.
For purchasers too, there’s no doubting that lenders are fighting hard to secure business, especially those who have buy-to-let propositions that will undoubtedly have seen a drop in purchase business over the last 12 months. The market for 2017 has not exactly set the world alight – although it seems pretty solid in terms of gross lending – but as we move towards the last third of the year and targets have to be met, one can be confident that rates are likely to drop further and there will be some very tasty deals on offer.
How this sits with the current level of supply though is a tricky question to answer. Remortgage activity remains strong because of highly competitive rates, but with a lack of supply what about purchase? Agents will know only too well that the numbers of properties on the book is not exactly at record highs – and while this lack of supply keeps house prices steady for existing owners, there will need to be more properties coming to market in far bigger numbers if we are going to meet the existing demand, and what is coming over the horizon in the future.
House builders appear not to have done themselves any favours with the new-build leasehold scandal, plus they may also feel unable to develop new sites and bigger developments while there is uncertainty about the future of the Help to Buy scheme. It’s estimated that HTB1 has accounted for at least 35-40% of all new-build sales in recent years and there were some recent reports that an ongoing review might call for the scheme to be scrapped early before its anticipated 2021 finishing date.
My view is that this would be madness and any Government fighting a pro-new housing agenda would be mad to call an early end to HTB. However, builders and developers might be spooked by the rumours and again this could lead to a fall back in new-build numbers, despite the Government’s assurances that it wouldn’t be finishing the scheme early.
As can be seen, there has been plenty going on in the ‘quiet month’ of August, and there’s no doubting that as September begins all parts of the market will be looking to ramp up activity. Whether this want/need can be translated into action however remains to be seen.
