Category: News

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.”

Cox & Flight Financial Solutions also claims agents using the service will speed up individual sales.

It suggests it offers mortgage and protection products from across the market, as well as access to exclusive mortgage deals not available on the High Street.

Cox & Flight also suggests it can help estate agents convert their sales pipeline into revenue by providing a value added service managing property sales from start to finish.

It adds that this will reduce fall-throughs.

Director Simon Cox comments:”We are tremendously excited to launch our new service. With an established background in estate agency and a long history of residential sales behind us, we are confident we can offer estate agency businesses the kind of complementary mortgage support package needed to compete in today’s home buying marketplace”.

Sarah Coles, personal finance analyst at the consultancy, made her prediction after the latest government house price data showing values bouncing back close to their record highs in August, after a small dip in July.

She says the erratic movement in price growth was inevitable after the stamp duty holiday changes, but insists that “when these fall out of the figures, there’s every sign that prices will remain resilient – even after interest rates rise.

“Most of the value of the stamp duty holiday was lost at the end of June, so we saw a big surge in average prices in June as people rushed for the deadline and pushed prices up. After this passed, the market took a breath, and prices dropped back slightly in July. Then, in August, the final stamp duty holiday deadline started exerting an influence.

“And while people could save far less at this point, there was still the psychological effect of the final deadline at the end of September urging them on. Price rises bounced back in August, and there’s every sign they’ll remain strong in September too.”

Coles says an interest rate rise is on the cards, because of movement amongst financial levers such as swap rates – but she says the signs are that an interest rate rise will not trigger house price falls.

“The banks are currently prepared to increase their exposure to risk in a way they would be wary of, if they thought prices would fall. So, for example, HSBC has increased limits on how much wealthy buyers can borrow. Those with incomes of £75,000 or more can now borrow five and a half times their income – up from five times – and there’s every chance other banks will follow suit”

“Likewise, the Bank of England Credit Conditions survey last week showed that banks were increasingly willing to lend in the three months to September, particularly to those with less equity in their homes. They expected to make borrowing even easier towards the end of the year. When asked what affected their decision, while better economic conditions dominated, they were also positive about the future of house prices.”

Coles believes the immediate prospects for the property market aren’t tied so directly to the Bank of England base rate as they once were, partly because most mortgages are currently fixed over two or five years.

“Those who are locked into rock bottom rates are protected from rate rises for a significant period. Those who have deals coming to an end within the next six months can arrange a new fixed rate right now, which will kick in immediately after their deal expires.

“And while rate rises will be unwelcome, and will eventually feed into higher mortgage payments over the coming years, as yet, rate rises are being predicted at relatively modest levels, so there will still be deals available at historically affordable rates. So while we may see some of the heat come out of the market, we’re not currently expecting prices to fall.”

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.”

Chris Loaring, a spokesperson for the CIE, commented: “It is commonly agreed across the industry that Unique Property Reference Numbers will offer the best solution towards creating a unique, non-transferable and universal reference for every property. Our whitepaper offers the first analysis of what practical steps are needed to make the implementation possible to get all stakeholders aligned.

“At the CIE, we collectively have more industry experts in one place who are immersed in property, geospatial and UPRN data. We are therefore very pleased to present to the market a whitepaper that breaks down the role UPRNs will play in providing one true record for each address, which will ultimately help towards reducing transactional delays and improve the overall experience.”

At a later date, the CIE will be hosting an industry roundtable event to discuss the details of the whitepaper. The date and joining details of the event will be announced soon.

The overall purpose of the CIE is to raise data quality and content standards in property searches used within the UK conveyancing process, with a membership that includes Argyll Environmental, Geodesys, Groundsure, Landmark Information, Mining Searches UK, PinPoint Information, SearchFlow, Ambiental, Glenigan, JBA Risk Management and Barbour ABI.

Momentum behind wider use of UPRNs – which are similar to car license plates – has been growing in the last couple of years.

In July last year, trade body Propertymark urged agents to start being trained in the use of software operating the UPRN system, while in January this year Countrywide and Foxtons were among the names backing a new scheme to speed up the conveyancing process.

The agencies, along with Savills and a string of agency trade bodies, threw their weight behind an idea to identify every single UK residential property with a unique number, signing a letter sent to then-Housing Secretary Robert Jenrick outlining the potential advantages of the Unique Property Reference Number concept.

Most recently, in late June 2021, the Unique Property Reference Number concept was backed by the government as well.

Housing minister Chris Pincher said at the time: “We know that the current buying and selling process is besieged by long and arduous and byzantine processes and inefficiencies.

“When a buyer is found, old and dusty deeds, half-forgotten documents lying in solicitors’ safes or basements of town halls – they have got to be located, they’ve got to be shared, they’ve got to be pored over by both parties in great detail.”

With UPRNs, he argued that “the processes can be streamlined. Information like the number of previous owners, boundaries, that can all be shared digitally at the touch of a key helping to speed the whole house buying process along.”

The top ten new supply shortage hotspots are all in South East and East of England, with average asking prices in three of the hotspots – Newmarket, Berkhamsted and Bushey – up by nine per cent since 2019.

The portal says that nationally the average number of available properties on an agent’s books is 16, down from 29 in July 2020.

The stock shortage is being felt across the country, with the average available stock per agent on Rightmove dropping from 29 in July 2020 to just 16 properties now.

Around two third of properties have already found a buyer, and some of the hotter areas like Newmarket are seeing a higher rate of three quarters of homes already sold subject to contract.

Tim Bannister, Rightmove’s director of property data, comments: “If we think back to July last year the market in England had been open again for around six weeks, the stamp duty holiday was announced, and a summer frenzy was just beginning.

“Twelve months on, the combination of fewer sellers coming to market and sustained demand has resulted in a summer seller shortfall, and so the challenge for agents now is to try and replenish the stock to meet the demand from buyers.

“For those considering coming to market this year, now could be the time to find out what your home could be worth from a local agent.”

To give an example of the stock drought in the worst-hit area, Neil Harris – director at Cheffins in Newmarket – says: “There’s a real shortage of houses for sale which means that for every property which does come available, we see huge levels of interest.

“We’ve consistently benefitted from Cambridge’s house price growth, and as Cambridge becomes increasingly expensive, coupled with its fast-growing population and booming economy, buyers have continually looked to move to Newmarket in search of more space for their money. Similarly, as the days of the five day a week commute appear to be coming to an end, we’ve seen a growth in buyers from London coming to the area, seeking out countryside and village homes at lower price tags.”