12 December 2017

What 2018 has in store for property and mortgages

2017 turned out to be a stronger-than-expected year for the housing market and borrowers were able to benefit from some of the lowest fixed-rate mortgages ever seen. Two-year fixes reached a low of sub 1 per cent while five-year fixes slipped below 2 per cent. Meanwhile, interest rates may have edged up in November but by only a quarter point, which had already been factored in by the markets. With lenders keen to lend, there are still plenty of tempting rates to attract borrowers.

Moving into 2018 and we expect to see more of the same. Much will depend on Brexit negotiations – if we make decent progress then the next interest rate movement is likely to be upwards but not until 2019. If, however, we walk away from a deal for whatever reason then a reduction in interest rates may even be a possibility, particularly if the UK slips back into a mild recession. Either way, interest rates are not going very far anytime soon.

Remortgaging will continue to be popular as borrowers come off fixed and tracker deals onto much higher standard variable rates. The stamp duty exemption for first-time buyers, announced in the Budget, is also likely to continue to stimulate that end of the market, with lenders continuing to offer 90 or even 95 per cent loan-to-value deals at competitive rates.

The buy-to-let market is set to be a challenge with novice landlords steering clear, deterred by the reduction in mortgage interest tax relief and the 3 per cent stamp duty surcharge. However, experienced landlords owning property via limited companies may continue to grow their portfolios where they come across opportunities.

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