It is good to see that the year is ending on such a positive note, with increased confidence in the community, exceptionally low mortgage interest rates, an active housing market and a halt to falling house prices. This bodes well for the New Year. There will no doubt be more challenges that will emerge associated with Brexit, the political and economic situation in Europe and the fallout from the American presidential election, but it seems that Jersey is well positioned to manage any risks.
INTEREST RATES Two key elements of the housing market that are unlikely to change significantly will be interest rates on mortgages and local house prices, which will no doubt help to stimulate growth in the market during the next year.
DOWNWARD TREND. It is interesting to see that during the past twelve months there has been a downward trend in both residential and buy to let mortgage interest rates from most, but not all, of the local lenders. The reductions have been small as we are now dealing with very small margins at this point in the interest rate cycle. Noticeable however is the increase in choice, not only with tracker rates, but also fixed options, with the addition during the summer months of 7 and 10 year fixed rates.
Following consultation, most of our Mortgage Shop clients tend to err on the side of caution by choosing either 3 or 5 year fixed rates, either for the peace of mind these offer, or due to the high fees that are charged by lenders at the time of rate review, when a fixed or tracker option expires.
RATES WILL RISE BUT WHEN? Most economists seem to have given up making predictions as to when the Bank of England base rate is going to rise, although some commentators still maintain that the only certainty is that rates will rise – this is something of which we are all aware, but tend to ignore, due to the many false alarms that we have seen over the past few years - hence the best advice of locking into a medium term fixed rate (depending on client circumstances).
Looking to the future, it is likely that Bank of England base rate will have to remain low, with modest increases if and when they occur, so as to avoid upsetting the delicate balance of the UK economy. This will mean that borrowers should look forward to low costs of borrowing for the medium term, even when house prices start to rise in the Island.
MARKET TREND During the year we have noted a distinct trend where the opportunity to negotiate on price is becoming increasingly difficult as more buyers enter the market, with offers being made within days rather than weeks or even months, as has been the norm for the past few years. Our clients tell us that they have frequently had to offer the full asking price just to secure an agreement ahead of others who have also shown an interest. Professional valuers now tell us that the next move is going to be up which will be great news for the market but perhaps not so good for First Time Buyers.
GET YOUR MORTGAGE ORGANISED FIRST. The key to a successful purchase centres around seeking professional mortgage advice as a starting point - there is no point in mentally moving in to a three bed house if your borrowing capacity will only secure a bedsit. Armed with an approved maximum mortgage, you will be welcomed with open arms by estate agents as mortgage approval is something that can cause major delays in the purchase process.
RECORD FIGURES. Whilst end of the year figures aren’t yet available, projections of total mortgage lending on residential property in the freehold, flying freehold and share transfer categories will exceed the 2015 totals of approximately £875m, increasing to approximately £1bn for this year. This has to be a record.
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