Most of the big estate agents have had their say on what’s in the tea leaves for 2016, but here’s how independent broker Private Finance sees the UK mortgage market panning out over the next twelve months…
- Interest rate outlook will remain stable
An interest rate hike is likely to be held off for most of 2016. If a rate hike were to be brought in next year; it is likely to be by small increases in the later part of the year. Fixed rate deals continue to present excellent value for money in the current market although we would strongly recommend that all borrowers review their mortgage strategies in the first half of next year so as not to miss out on what will have been some of the best mortgage deals we have ever seen or are likely to see again.
- Buy to let stamp duty hike will not be as bad as it seems
Following the announcement of a planned stamp duty hike on buy to let property in the recent Autumn Statement, we are urging clients not to panic as our outlook for the sector remains positive, in spite of these changes. Our latest research indicates that even with the 3% increase in stamp duty and gradual reduction of higher rate relief, the likely returns from buy to let property are still enough to deliver satisfactory yields to investors when compared to alternative investments.
The biggest drag on the buy to let sector will be adjustments lenders are making to their criteria and lower yields both of which impact on borrowing limits. Being able to achieve a 60% loan to value where capital gain is the objective will be an achievement with closer to 50% being the norm.
We do expect the corporate structure to emerge as a more mainstream method by which investors will participate in the buy to let sector. Lenders are likely to offer a range of products specifically targeting this development.
- The European Mortgage Credit Derivative will make for a busy start to the year and there will be unintended consequences
It is our view that most lenders are now generally EMCD ready, perhaps as a result of having to make significant changes to their systems following MMR. We expect the market will be very competitive at the start of the year as lenders try to close as much business as possible before the new legislation becomes effective. Most lenders are likely to adopt this strategy so they have a quieter, calmer business period whilst they are adjusting to the requirements of the EMCD. As with any new regulation, it will take several weeks for everyone to adjust to the new world; namely, lenders and inevitably consumers.
Simon Checkley, Managing Director of Private Finance: “The market of 2015 has been largely dominated and driven by activity in London. However, it is our belief that this trend will decline as we enter the New Year which will see more activity in other areas; particularly commuter towns around the M25. This ‘ripple’ effect will ensure that property buying and selling in 2016 returns to a market that is much more characteristic of a ‘business as usual’ environment and prices in London are highly likely to reflect that trend.”