After a year of uncertainty, what will 2018 bring for the housing market?
House prices are reliant on a healthy and functioning housing market, as well as consumer confidence. Whilst consumer confidence is likely to be hit by low wage growth and a further tightening of household spending, house prices are still expected to increase across most regions over the next 12 months, as demand for housing remains high.
House price inflation is good news for homeowners and those looking to re-mortgage, as they are more likely to have greater equity in your property and a lower loan to value, which opens the door to better mortgage rates from a range of lenders. However, for first time buyers, it means their ability to get on the housing ladder is further out of reach.
There has been a resurgence of first time buyers as market conditions and the availability of competitively priced higher loan to value mortgages, have made it easier for some first time buyers to get on the housing ladder.
Despite this, it is still tough for the majority of first time buyers to purchase their first home, particularly in London and the South East, where house prices are around 14 times the average first time buyer earnings of £32,000. Making the need to save a large deposit even greater.
Government initiatives have gone some way to helping younger people get on the housing ladder. The extension of the Help to Buy scheme, more shared ownership homes and an abolition of Stamp Duty for properties under £300,000, has been welcomed by some but the impact across the board is limited.
With interest rates still relatively low and house price growth slower, we expect to see more first time buyers enter the market in 2018. The expected sale of properties by buy to let landlords will also provide much needed stock at the lower end of the housing market ideal for first time buyers.
If you are thinking about getting on the housing ladder in 2018 or beyond, come and speak to us about the best way of doing so. We can talk you through how the whole process works, give you guidance on mortgage lender’s requirements and how you can best position yourself to get a mortgage. We can also advice on how much you can afford to borrow, which is an important step when beginning to house hunt and set budgets.
2017 was a challenging year for buy to let landlords as the Government implemented a range of policies to kerb investor appetite.
From April 2017 buy-to-let investors who own their properties directly, started to lose the ability to offset mortgage interest from their profits before calculating their tax liability. In 2017, landlords could offset only 75% of their mortgage interest against their profits, falling to 50% this year, 25% in 2019 and zero in 2020.
This, along with the changes to Stamp Duty and more stringent lending criteria implemented by the Prudential Regulation Authority (PRA), and landlords are having to make some tough decisions about their portfolio. We expect some will look to offload properties to better balance their investments.
Landlords may find it beneficial to take out longer fixed rate mortgages and take advantage of current interest rates to give them more security over the next few years.
Whilst the government went softer on landlords and investors in the Autumn Budget, the Chancellor may use next year’s Budget to further tighten policy to deter landlords from growing their property portfolios.
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