Irrespective of the shenanigans and political goings on in
Westminster recently, the housing market (for the time being anyway)
shows a striking resilience, fostered by the on-going wide-ranging
monetary policy by the Bank of England. With interest rates and unemployment
low, UKplc is heading into 2020 in reasonable condition. Additionally, despite the UK’s new homes
industry improving its year on year new build figures (building 173,660 new
homes this year to date - notably 8% more new homes than at the same time last
year), there has been an unequal increase in demand for housing,
especially in the most thriving areas of the Country.
With the discussion on whether the younger generation can
afford to buy, it is true the average cost of a UK property in the early 1970’s
was 3.8 times the average salary yet, nationally, it now stands at 8.4 times.
On the face of it that doesn’t look good in anyone’s books – yet that isn’t the
full story because it doesn’t reflect inflation and interest rates when it
comes to the cost of borrowing money in relation to a mortgage for property.
The current level of mortgage interest rates has not been
seen for many generations, meaning there are whole cohorts of the Huddersfield home-owning
population who have no appreciation of the pandemonium that will eat into
their household budgets should we ever return to the average historical cost of
borrowing (interest rates jumped to 15% in 1992 – which wasn’t that long ago
and between 2003 and 2007 they were on average 4.9%).
Now, once first-time buyers have jumped the hurdle of saving
enough for a 5% deposit, which is hard with rents and many carrying loans of
personal debt (unsecured loans), first-time buyers are currently spending an
average one sixth of their salary on their mortgage, meaning mortgage arrears are
at historical lows. However, on the other side of the coin repossessions have
started to grow, with 6,180 repossession orders made in the last quarter, a 55%
jump from 2017, yet nowhere near the 2009 high of 29,145 in the first quarter
of 2009.
Therefore, this week’s discussion on the Huddersfield
property market is – where are we with lending (mortgages and unsecured loans)
and how is it affecting the Huddersfield, and national, property market?
One vital measure of the property market (and economy) is
the mortgage market. If all the mortgages were added up, they would total £968.1bn;
a lot when you consider the UK’s GDP is only £2,190.1bn. Mortgages are
important as uncertainty causes building societies and banks to curtail lending
(remember what happened in the Credit Crunch) and that seriously affects
property prices. Then we have unsecured personal loans; interestingly the
average Brit owes £991.42 in unsecured loans, a total of £36.1bn.
Lending is the lifeblood of our economy. Go back to 2007, and
the phrase ‘Credit Crunch’ hadn’t been invented, yet now the term has entered
our everyday language. In the autumn of 2007 it took a couple months before the
crunch began to affect the Huddersfield property market, but in early 2008, and
for the following year and half, Huddersfield property values dropped each
month like a stone.
Mercifully, after a phase of sluggishness, in
2011 the Huddersfield property market started to recover slowly as certitude
returned to the economy as a whole and in 2013 Huddersfield property values started
to rise as the economy sped upwards. Happily, the Bank of England recognised
the start of another boom and bust cycle, so in Spring of 2015, new rules for mortgage
lending were introduced and for the following few years we have seen a reappearance
to more credible and steady medium-term property price growth.
Huddersfield Property Values are 21.2%
higher since the Credit Crunch
And what of the other side of the coin in terms of excess
lending in Huddersfield?
Since 1977, the average Bank of England interest rate has
been 6.65%, making the current low rate of 0.75% very low indeed. Yet the issue
isn’t the amount of lending, as much as the persons ability to pay. Therefore,
whether a person’s mortgage is fixed or not is more important than the amount
owed.
Thankfully, the proportion of borrowers fixing their
mortgage rate has gone from 31.5% in the autumn of 2012 to the current 70.2%.
If you haven’t fixed your mortgage – maybe you should follow the majority?
The total cost of mortgages owed by
people in Huddersfield is £2,795,962,162
(Based on the HD 1 to HD9 postcodes)
In my modest opinion, if things do get a
little rocky and uncertainty seeps back in the coming years (and nobody knows
what will happen on that front), interest rates can only go one way from their current
ultra low level of 0.75% ….and that is why I consider it important to highlight
this to all the homeowners and landlords of Huddersfield. Maybe, just maybe,
you might want to consider taking some advice from one of the many qualified
mortgage advisors in Huddersfield?
If you are interested in the Huddersfield
Property Market the https://huddersfieldproperty.blogspot.com/ is worth a visit.
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