As we end the first quarter of the year, it is clear the energy that first appeared in the local housing market at the beginning of the year has continued and in fact grown as we look at the number of new transactions that are currently being agreed between willing vendors and purchasers who have already sought advice on their borrowing capacity.

INCREASED ACTIVITY

After eighteen months of a totally inactive market, this is welcome news for purchasers who are able to satisfy the close scrutiny of the seven mortgage providers in the Jersey market where stress and affordability tests have replaced income multiples.

Borrowers now realise they must make big sacrifices if they wish to become property owners by reducing expenditure on many items except for food, services, transport and education for their children.

A RETURN TO THE NORM

This is nothing new, as it was the norm up to twelve years ago when mortgage rates fell to unrealistically low figures and mortgage lenders offered high levels of income multiple. House prices rose out of control until the Bank of England’s Base Rate moved from 0.01% to 5.25% in fourteen consecutive jumps, which resulted in the market crashing.

The aftermath of these events has been tough for people who bought at the top end of the market and now find themselves trapped in what for some of them is negative equity where their mortgage exceeds the value of their property.

For those owners who purchased a few years ago, and who wish to trade up, the situation is much easier if they adopt a realistic attitude towards asking price and are prepared to negotiate the price downwards – an experienced Estate Agent will happily help with guideline figures.

ASKING PRICES CONTINUE TO FALL

Asking prices have fallen by in excess of 20% when you look at current transactions and this figure will fall even further as the market slowly recovers.

This is not a signal for vendors to start increasing their asking prices as the recovery still has a long way to go and will be dictated by interest rates and lending criteria.

WHEN WILL INTEREST RATES FALL?

With the Bank of England Base Rate currently standing at 5.25%, all eyes are on the swaps market which reflects predictions of the future level of this rate. Currently, this suggests that we will see this falling to 4.5% by year end, in three increments each of 0.25%.

Should this happen, the impact could be significant as it will give new purchasers an even greater incentive to move forward.

Several years ago, interest rates were increased to combat inflation that was running too high and was reduced significantly due to the Bank of England’s determination to redress the balance, and this policy appears to have been successful in the current financial market. It should be remembered however that inflation in the UK is very much at the mercy of worldwide events which could fuel a new wave of inflationary pressures particularly in respect of oil and shipping costs.

A WIDE CHOICE OF PROPERTY ON THE MARKET

Despite interest rates being high, the potential activity that we are seeing in the market is tangible, with 1443 properties featured on places.je, of which no less than 265 are being advertised at less than £400,000 - 308 properties are featured in the range between £300,000 and £500,000, with a further 288 on sale from £500,000 up to £700,000.

These statistics clearly illustrate that there is a wide choice of property to match the expectations of many of the house hunters who are currently entering the market.

BEST RATES

The best mortgage interest rates that are available this month have changed little since the flurry of competitive activity that occurred earlier this year, and this always causes a dilemma for purchasers entering the market or seeking advice on re-mortgaging from an existing fixed rate that is about to expire.

We usually discuss three options to include examples of two- and five-year fixed rates and a two-year tracker.

If rates are going to fall, then a five-year rate could well be too expensive after the first year or so, which means that the choice of a two-year fix might be of better value despite the shortness of the term. Alternatively, a tracker rate, whilst being the most expensive of the three, will benefit from immediate changes in the event of Base Rate moving.

Bank of England Base Rate 5.25%
2-year Tracker rate 60% LTV	April 2024 5.75%	March 2024 5.95%	February 2024 5.95%
2-year Fixed rate 60% LTV	April 2024 5.34%	March 2024 5.39%	February 2024 5.74%
2-year Fixed rate 90% LTV	April 2024 5.64%	March 2024 5.69%	February 2024 6.04%
5-year Fixed rate 60% LTV	April 2024 4.84%	March 2024 4.89%	February 2024 5.14%
5-year Fixed rate 90% LTV	April 2024 5.14%	March 2024 5.34%	February 2024 5.34%