Which Way Will the Housing Market Turn?

Equity release products are now twice as popular as they were five years ago. But the certainty of house valuations increasing is looking increasingly shaky, which could make the continuation of this trend increasingly uncertain.

A fall of 1% was recorded for the year to February for London house prices, the first such fall since 2009. The rate of growth in the UK as a whole slowed to 4.4%, which was the lowest in seven months. If the theory that the capital is a predictor for the rest of the country holds, trouble could lie ahead for the UK property market.

But is a crash or correction actually likely? With rates set to rise, this could put pressure on those who are on the edge of being able to afford their loan repayments. The Bank of England recently raised rates from 0.25% to 0.5%, equalling the rate during the 2009 to 2016 period.

It could rise again as early as next month as many predicted, however, Mark Carney, the governor of the Bank of England (BoE) has recently raised the possibility that the planned rise may not happen yet.

The markets have hedged their bets with a 50/50 chance of an increase as the current consensus.

Another factor is the fact that the Bank of England does not directly control the interest rate on new home loans. The average rate on a new mortgage is approximately 2%, which is significantly down on the most recent peak of 6%, recorded in 2008.

Another factor that reduces the likelihood of a crash is that the BoE has introduced restrictions on lending, specifying that banks are limited in the amount that they can lend at more than 4.5 times a borrower's income.

Also, by limiting the attractiveness of buy-to-lets, the government has reduced demand for this type of arrangement.

Are you thinking of making a move this year? Our Mortgage team here at Westminster Wealth can ensure that you receive the most suitable mortgage for your personal circumstances, needs and objectives. Contact us today.

Information is based on our current understanding of taxation legislation and regulations which is subject to change.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Our charges are usually between £395 and £995 depending on the type and amount of borrowing required and individual circumstances.