Author: Antony Antoniou

The Bank of England has raised interest rates for the first time in more than three years, in response to surging price rises.

Most analysts believe the increase – to 0.25 per cent from 0.1 per cent- will make negligible difference to the housing market.

The decision by the Bank of England will add just over £15 to the typical monthly repayment for a tracker mortgage customer. A standard variable rate mortgage-holder is likely to pay nearly £10 extra a month.

Around 50 per cent of all homes are owned outright anyway, with no mortgage owed on them, and of the rest around three quarters have fixed rate mortgage deals, meaning their repayments won’t change until their current deal ends.

The remaining two million owners are on standard variable rate mortgages or tracker mortgages so their repayments will go up as individual mortgage lenders increase their rates in response to the Bank of England announcement.

Cory Askew, head of sales at Chestertons, says: “We expect the Bank of England’s decision to increase the interest rate to 0.25% to have very limited impact on property buyers and existing homeowners. Further indicating that buyer demand remains strong, is the fact that we have seen no seasonal slowdown this year.”

Simon Gammon of Knight Frank adds: “By raising the base rate it’s clear that the Bank of England believes the economy will shrug off most of the effects of Omicron. Getting a grip on rising inflation appears to be the number one priority.

“Mortgage rates on the high street have been edging upwards during recent weeks in anticipation of this moment and it’s clear the lenders believe there could be at least one more hike in the base rate next year.”

“This rate rise may not be significant but it is a clear statement of intent” says Vanessa Hale, head of insights and residential research at Strutt & Parker.

“The rise has been a long time coming, and with inflation now at decade high levels, there really is little alternative. The rate rise has been priced in to mortgages, and with fixed mortgages making up around 80% of the current market, the housing sector is unlikely to be impacted too dramatically.

“The reality is that demand for housing continues to outstrip supply which will sustain prices for 2022. But with the cost of living continuing to rise, this could have an impact on the housing market for the medium term.”

Eleanor Bateman, policy officer at Propertymark, comments: “The increase in base rate to 0.25 per cent is a small and necessary step and one that most had anticipated for some time.

“Mortgage rates have been creeping up over the past few months, and while those on variable rates will see payments increase, the cost of borrowing remains low relative to historic levels.

“Though, traditionally, the winter months see a decline in activity, our housing market report shows sustained demand with average sales agreed maintained to the end of October.

“With indications that lifestyle factors are continuing to prompt many into making a move, we do not expect the announcement to have a significant, negative impact on the market.”

Around a quarter of mortgage lenders currently have ‘green’ products promoting improved EPCs – and the vast majority of the rest say similar mortgages are on their way.

The Mortgage Advice Bureau tested 64 major lenders – some 25 per cent currently offer green or net zero mortgages, and of the others 88 per cent say they have plans to do so.

MAB also sought to uncover how many consumers are being offered green mortgages. Of those who have either bought a property or remortgaged in the past 18 months, just 14 per cent had been offered a green mortgage product.

Research amongst borrowers has found that 69 per cent of respondents have not heard of a green mortgage, despite it potentially reducing monthly mortgage payments based on how eco-friendly their property might be.

When asked if they would pay more for a green mortgage, knowing they would be helping with sustainability and the environment, nearly two in five (38 per cent) said they would.

Two in five said they would not pay more for a green mortgage, even knowing it would help the environment. Delving into the reasons why, 24 per cent said they can’t afford to pay any more, 20 per cent don’t want to have to pay any more for their mortgage, and 12 per cent said they already pay enough.

A further 16 per cent said they shouldn’t have to pay more to help the environment and 13 per cent said they don’t know how it will help.

Ben Thompson, deputy chief executive officer at Mortgage Advice Bureau, comments: “Green mortgages are a well-intended product, but they’re only scratching the surface in terms of helping to make the housing market more energy efficient. Existing borrowers, homeowners, and landlords who have properties below a C rating are encouraged to invest their own money to make their homes more efficient and less polluting. However, grants and incentives being offered by government is comparable to a drop in the ocean.

“Retrofitting a property could cost thousands of pounds which most homeowners may not have at hand to call upon. They’re therefore reliant on potentially borrowing against their property, which is where issues bubble to the surface.

“We welcome recent moves by lenders to look more favourably upon borrowers’ affordability based on them buying more energy efficient homes. This makes good sense and we’d like to see more of this positive action.

“However, we need combined industry thinking and innovation to work out how best and who best can influence those properties not meeting A, B, or C ratings to make sure the challenge is being properly tackled. Only then will the real benefits start to be felt.”

This year’s 12 per cent rise in the cost of moving home follows an eight per cent rise in 2020, when costs jumped from £3,417 to £3,688.

Now the average cost is £4,116 excluding the cost of the property and mortgage.

After agency fees, legal services and stamp duty, additional charges – mostly for removals, cleaning and storage – now average £748.

MoneySuperMarket’s findings uncover significant cost differences between cities. Aberdeen is the most expensive location, with additional moving costs of £1,020.

The five most common additional costs are buying new furniture, purchasing new household items such as bedding and kitchen utensils, paying for post to be re-directed,  changing utility providers, and removals.

Jo Thornhill, money expert at MoneySuperMarket, comments: “The cost of moving house is … an issue that has come into sharp focus over the past 18 months with the housing market booming in response to government incentives like the stamp duty holiday.

“What is less well known are those additional costs of moving that can add a significant amount to your bill, over and above items like stamp duty, legal and estate agency fees.”

Government figures from the Office for National Statistics data show that the average house price across the UK reached £264,000 in August, some £25,000 more than a year earlier.

Scotland saw the highest annual growth, with prices up by 16.9 per cent to £181,000; followed by Wales, where average prices were up 12.5 per cent to £195,000; England, where prices rose 9.8 per cent to £281,000; and Northern Ireland, where prices were up 9.0 per cent to £153,000.

Yet again London saw the lowest annual growth – for the ninth consecutive month – with prices up 7.5 per cent annually but on a monthly basis prices jumped 5.6 per cent in August alone in the capital.

Director of Benham and Reeves, Marc von Grundherr, commented: “Yet further proof that the drop in property prices following the initial stamp duty holiday deadline was merely a pause for breath in an otherwise marathon run of positive market momentum.

“There’s little sign of this letting up and should an increase in interest rates materialise, the likelihood is that it will be fairly palatable for the average homebuyer. Therefore, we don’t expect it to have any notable impact on the nation’s insatiable appetite for homeownership and the market should continue moving forward at pace well into next year.”

Landmark Information Group’s latest Property Trends Report has identified a fifth consecutive month of low property supply levels, with new listings reporting lower numbers than pre-pandemic figures in 2019.

The report, covering England and Wales for the past three months, shows that listings were down by an average of nine per cent compared to 2019 data, while demand continued to outpace supply, maintaining a sustained imbalance in the market.

Completions peaked at 44 per cent up in September this year (ahead of the stamp duty holiday end) versus September 2019, although the previous two months both recorded fewer completions compared to the prior two years.

LIG says: “This has been a rollercoaster period for property lawyers and conveyancers as they navigate the various SDLT holiday deadlines and consequential activity peaks.”

In more detail, the report says:

Property Listings: Last quarter, new property listings were down every month when compared to the same period in 2019: down six per cent in July, down 13 per cent in August and down eight per cent in September, even though demand has remained steady. “Unless a rebalance occurs, there is the potential to see stock levels continue to decrease as we head towards the end of the year, which could continue to affect house prices.”

Sold Subject to Contract: For properties converting to Sold Subject to Contract, the data was relatively stable compared to previous quarters with a gradual trend that moved closer to the SSTC data from 2019 from month to month: July reported a nine per cent decrease, August seven per cent down and September a one per cent difference from the pre-pandemic stats.

Legal Conveyancing: Property search order-volumes were a more consistent picture, month to month, with volumes marginally higher than 2019 figures; three per cent up in July, four per cent up in August and two per cent in September. “Even though property lawyers and conveyancers were working hard to meet the stamp duty deadline, it is most likely that a large proportion of searches were ordered in the previous quarter, due to typical order patterns and turnaround times.”

Completions:  Data shows that completions in September peaked 44 per cent higher than in September 2019 driven by the need to beat the conclusion of the stamp duty incentive. The data shows however that completions were much lower in both July (down 35 per cent) and August (down 19 per cent) compared to 2019, illustrating a slowdown in mid-summer, most likely as legal professionals took some well-deserved time off after the exceptionally busy previous quarter.

Simon Brown, chief executive of Landmark Information Group, says: “The property industry has shown great resilience over the last 18 months as it has had to traverse so many challenges – from the market closure amid the height of the Covid lockdowns, to surges in market activity driven by the Government’s stimulus activities, all the while managing home-working, furlough and unpredictable market conditions.

“As much of the property industry breathes a sigh of relief following the various surges in market activity ahead of the stamp duty deadlines, many aspects of the market are starting to present more stable figures, including SSTC, legal search order-volumes and mortgage valuations.

We are however seeing the demand for properties continuing to exceed supply. This market imbalance has the potential to lead to depressed sales, placing increasing pressure on property prices, as sellers are able to command higher asking prices. We look to see if this adjusts as we head towards the pre-Christmas sales period.”

The website revealed that the stamp duty holiday has increased the price of first-time buyer homes by an average of 11.7% in England in the last year, and by as much as 31.5% in some areas of the country.

The stamp duty holiday was introduced by Chancellor Rishi Sunak in July 2020 as a financial incentive to keep the housing market buoyant during the pandemic and help galvanise the UK economy.

Heightened demand has, however, pushed house prices to an all-time high, and GetAgent claims that first-time purchasers are now facing bigger challenges than ever when it comes to getting on the ladder for the first time and securing homeownership.

Its analysis found that the average price of a first-time buyer home in July 2020, just before the stamp duty holiday was introduced, stood at £212,166 – but the latest figures reveal the average first-time buyer home now costs £236,982, a rise of £24,816 or 11.7%.

Regionally speaking, the North West has witnessed the largest rise, with the average first-time buyer in this part of the world now paying £168,820 – a 16.9% leap since July of last year.

First-time buyer price increases at a greater rate than the national average have also been seen in Yorkshire & Humber (14.8%), the North East (13.4%), West Midlands (13%), and East Midlands (12.9%).

GetAgent claims that, when analysing the market at local authority level, the bad news for England’s first-time buyers continues. In Richmondshire, North Yorkshire, for example, the average price for a first-time buyer was £178,974 in June 2020 – rising to £235,425 today, an increase of £56,451 or 31.5%.

In Rossendale, Lancashire, the average first-time buyer home costs £147,417 now, having increased 24.3% since the introduction of the stamp duty holiday.

Other areas to experience very high price rises include North Norfolk (23%), North Devon (19%), the Cotswolds (18%), and Hastings (18%).

Not all areas have seen an increase, though, although these areas still remain largely unaffordable for the average first-time buyer.

In Kensington & Chelsea, for instance, the average first-time buyer home cost £1.1 million in July 2020 – a figure which has since dropped to just over £1 million, a decrease of £75,093 or 6.5%.

A similar story has taken place in increasingly fashionable Hackney, where the stamp duty holiday caused a price drop of 4.1%, with the City of London (-4%), the City of Westminster (-3%), and Southwark (-1.4%) also seeing a reduction.

“There’s no denying that the stamp duty holiday has been a roaring success in terms of fuelling property market demand and keeping the market moving in an otherwise uncertain time,” Colby Short, founder and CEO of GetAgent, said.

“However, while many existing homeowners will have benefited from a boost in the value of their home, the reality is that the nation’s first-time buyers are worse off when it comes to taking that first step onto the property ladder.”

He added: “Although mortgage costs remain very favourable at present, the sheer increase in property values and the deposit required will see many either forced to save for longer, or priced out of the market completely.”