UK Mortgage Lending Rises and Low Interest Rates

By Marc Trup, the Founder and CEO of Arthur Online

Despite the Government’s decision to reduce Stamp Duty for first time buyers last November, the first time buyers’ market has not shown many signs of growth.

Although UK mortgage lending rose by 4.9 % in February compared to the same period last year, the amount was below the 2017 monthly average borrowing figures. It is believed that borrowers are eager to climb on the property ladder ahead of forecasted interest rate rises, as predicted in all international markets, which include America, Europe and China. We are seeing a squeeze on real incomes of potential borrowers due to inflation and debt through over-use of credit cards. However, this could ease with the strengthening of sterling and a strong labour market.

With London house prices continuing to fall and house prices in the rest of the country increasing marginally, confidence in the property market is not at its highest. The Nationwide Building Society reported an average house price of £211,625 in March equating to an annual rise of 2.2%, and it is predicted that price growth will slow further to around 2%. Although mortgage rate rises are predicted over the coming year, it is not known when they will come and how high they will be. We do know that the policy of access to ultra-easy money will be short lived. With the lack of Government intervention keeping sterling weak, which could change at any time, the announcement of interest rate rises could have an effect on international buyers entering the UK market due to a strengthened pound.

If we can speculate that there will be a 2% interest rate increase, one being fairly soon and the other in the autumn, pundits are forecasting that the US Federal Reserve could raise interest rates three to four times over the coming year, as the US economy shows strength and in need of possible controlling. This is in contrast to Europe, where speculation is that there will be no interest rate rise, however, it will be interesting to see what quantitative easing the EU adopts and their long-term action plan for 2019.

With all this speculation, we head to the real crunch of what interest rates the UK market will offer new homeowners and the remortgaging market, with particular interest to the fixed rates mortgages over two, five and, in some cases, ten years. These are increasing in price and, in some cases, loan-to-value criteria are becoming more stringent, in order to realise the best deals on the market, with many of these looking for 60% deposit. It is believed that these rates and their increase will have a greater impact on prices in London than in the rest of the UK, due to the higher loan-to-income ratios in the capital. Home sellers are achieving nationally over 96% of their asking price, with the capital being just over 95%, showing confidence in the market increasing the further away you are from London. However, in the most popular locations, buyer demand is still pushing prices higher, due to lack of choice and there are generally less overpriced speculative properties appearing on the market.

Marc Trup is the Founder and CEO of Arthur Online

Marc fell into the property sector after selling his first business in 1998 to BUPA Healthcare. Focusing on residential property, he built up a portfolio in and around the London area, starting off with a small block of flats. Over the following 15 years, Marc grew his portfolio to manage over 85 properties. He wanted a system that allowed him to manage the portfolio from his iPhone, while drinking his espresso at the local coffee shop. Having searched online to find an app to help him do just that, he realised that it simply didn’t exist. So, he founded Arthur Online to make not only his life easier, but that of other property managers. Arthur Online is a cloud-based platform that enables property managers to respond instantly and solve problems fast – be it with tenants, contractors, property owners or letting agents. https://www.arthuronline.co.uk/

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