August has been a mixed bag for the property market, with many authorities declaring we are in the midst of a ‘two-speed market’, where realistically priced homes are selling quickly and efficiently, but the opposite is true for those with more ambitious asking prices.
In this high-supply market, buyers have a clear advantage, and this hierarchy is being compounded by a combination of softening house prices, reduced mortgage rates and increasing confidence.
Behind this relatively positive picture of market health is the decision by the Bank of England earlier this month to reduce the Base Rate by 0.25%. This was the third rate drop this year, and correspondingly the average rate for a 2-year fixed rate mortgage has dipped to 4.51% - 0.73% less than at this time last year. This has certainly helped edge affordability in the right direction, but as lender competition still remains fierce, it might well be that this is the extent of the mortgage improvements we’ll see this year.
Looking ahead...
The financial markets are anticipated to make one final cut to the Base Rate, assuming there are no drastic changes to the broader economic environment, and this could bring it to 3.75% by the end of the year. This would have positive implications for how much banks charge for mortgages and other loans, and how much disposable income individuals and businesses have to spend.
Aside from cuts to interest rates, one of the ways that is being considered by the treasury to raise revenue and stimulate sluggish economic growth is a major overhaul to the tax system. This could see stamp duty scrapped and replaced by a tax on the sale of homes worth more than £500,000, as part of a wider overhaul which might ultimately see the end of council tax.
The suggestion is that this tax would not be applied retrospectively, but on properties purchased after the policy was introduced. This ‘modern’ property tax system would supposedly make it easier for home-movers to upsize or downsize and would ‘better reflect today’s real property values’, however, it would be a highly complex process and could take more than one parliament to implement.
In summary...
The property market is faring well considering the uncertainty that prevails in the UK economy, and although a continuation of this trend hangs on some very "finely balanced" decisions by Rachel Reeves, this is unlikely to dampen the predictable uplift of activity that happens in the autumn, once the typically quieter summer months have drawn to a close. This is something that motivated sellers and buyers are advised to consider when weighing up the bigger picture of factors influencing their onward move.
For more information email property@braxtons.co.uk or email 01628 674234.