Property & Mortgage Outlook – June 2021

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It is generally regarded as a truism that the UK is embroiled in a love affair with property. This has been put to the test more rigorously than ever before over the past 15 months, with the Covid-19 crisis and sudden implementation of Brexit putting the brakes on much of the UK economy.

The property market, though, has been in buoyant form since the first lockdown ended. In fact, the market has fared so strongly that it is now said that we are in a property bubble. This reflects on the striking rises in both values and the volume of transactional activity recorded.

While much of this can be accredited to the introduction of the Stamp Duty Land Tax holiday in July 2020, it also echoes the maxim of UK property’s supremacy as a perceived safe investment. The figures tell their own story. The ONS today reported a year-on-year increase in UK average house prices of 10.2% in March 2021 – the largest rate of annual growth the UK has seen since 2007. The question is whether this remarkable growth can be, or should be, sustained in the long term.

There is consensus among commentators that the market will struggle to maintain the boom in prices and activity at this rate – a plateau must be expected. However, it is not necessarily true that boom must precede bust. Indeed, with considerate and appropriate measures, gaining a better control of the current property bubble need not result in prices tumbling.

Of course, there are harbingers of doom who predict a sharp decline in the foreseeable future. One particular date of interest will be 1 July, when the stamp duty holiday is due to begin tapering down before a return to the previous rate as of 1 October. This is assuming the Chancellor does not prolong the holiday further; something that certainly cannot be ruled out. Certainly, this tax relief has played a major part in catalysing the property bubble we see today.

It should be expected that the bullish growth of property as a sector will eventually hit a ceiling. It must also be noted that its cessation is highly unlikely to herald a decline in demand and activity on the levels required to instigate a market ‘crash’. Investors and developers, as well as buyers and sellers, will have less incentive to invest at pace in property, but the market will still hold broad appeal as an investment asset.

While the conditions of the pandemic and its associated economic reforms have certainly accelerated the rate of growth, a steady rise in property value has been a more or less unbroken trend for years now. Whether buyers seek to purchase for personal occupancy or as an asset for rental yield and capital speculation, healthy levels of demand will continue even as we emerge into a more predictable and certain marketplace.

Best Buys* (as of 1 June 2021)

Initial Rate Description Subsequent Rate Overall Cost For Comparison (APR) Early Repayment Charge Max Loan Fee
0.99% 2 Year Fix 3.59% 3.20% 2% Year 1, 1% Year 2 £1m £1,495
1.03% 2 Year Fix, Large Loan 3.59% 3.20% 1.5% Year 1, 0.75% Year 2 £10m £1,495
1.19% 5 Year Fix 3.59% 2.70% 5% Year 1, reducing annually to 1% by Year 5 £1m £1,495
1.19% 2 Year Fix – BTL 4.74% 4.30% 1.5% Year 1, 1% Year 2 £1.5m 2% of loan

Whether you are coming to the end of your mortgage product or keen to compare your current rate to the best available elsewhere, please contact your adviser who can put you in touch with our mortgage partners.

* Lending criteria restrictions apply to all products, always seek independent advice.

Articles on this website are offered only for general information and educational purposes. They are not offered as, and do not constitute, financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional.

Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise and investors may not get back the amounts originally invested.

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Source: Professional Mortgage Services and Techlink.

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