Inflation and the rising cost of living are suddenly at the forefront of everyone’s mind after a decade of silence. The current high inflation is fueled by several factors, including the scarcity of certain products, the rising cost of fuel and the restriction in the supply of certain goods due to the war in Ukraine.
This led the Bank of England to use one of its main levers, interest rates, to help dampen inflation.
The outlook suggests that further interest rate hikes are on the horizon in an attempt to slow the rate of inflation. This has a tangible effect on the marketing of housing in terms of the cost of borrowing. Over the past 10-15 years, we have become accustomed to a low interest rate environment and corresponding lower cost of borrowing, with some mortgage interest rates even falling below 1%.
Lower mortgage rates allowed people to borrow more without hurting overall affordability and monthly expenses. Inflation and rising household bills also have a direct effect on eligibility for the best mortgage rates, as the cost of living is factored into any decision about affordability of mortgage payments and, of course, less disposable income makes it more difficult to save for a deposit.
Any increase in the Bank of England’s “base rate” is normally passed on from banks to borrowers in the form of higher mortgage interest rates. This in turn reduces the amount a person can afford to borrow to buy a property.
Despite this, mortgage availability remains good and some lenders’ 5-year fixed-term mortgage products are offered at lower interest rates than 2-year products, suggesting that these lenders are not anticipating an image of long-term and continuing interest. rate increases.
According to our mortgage expert partners, the “base rate” is not the only factor that influences the interest rates offered to borrowers. Competition between lenders remains fierce and some banks have more money than they can handle to the point of being, in fact, more constrained by their ability to process new mortgage applications than by their desire to lend. . As underlying interest rates rise, not all of these increases are being passed on to borrowers at this time.
The option exists at the moment to “lock” your rate for a longer period of time at attractive rates and give you a level of certainty at an uncertain time
We’ve handpicked Scotland’s best mortgage advisers and experts to guide our buyers in this area. If you are considering buying and are concerned about potential interest rate increases, please write to us and we will arrange an introduction to these experts for a free initial consultation.
What the numbers tell us
The latest provisional UK House Price Index statistics show that the average price of a property in Scotland in March 2022 was £181,415, an increase of 8.0% from March 2021. previous month, house prices in Scotland remained essentially unchanged (a decrease of 0.05%) between February 2022 and March 2022.
The average UK house price was £278,436, an increase of 9.8% from March 2021 and an increase of 0.3% from the previous month.
Residential sales volume in Scotland in January 2022 was 7,181, down 5.0% from the initial preliminary estimate for January 2021 and up 4.7% from January 2020.
Rightmove reported that the price of goods coming onto the market hit a fourth consecutive high of £367,501, up 2.1% per month (+£7,400). Average asking prices have risen by more than £55,000 in the past two years, compared to an increase of £6,000 in the two years before the pandemic.
ESPC reported that between February and April 2022 the average selling price of properties in Edinburgh, Lothians, Fife and the Borders rose by 6.5% year-on-year to £273,437.
Sales volumes fell 21.2% annually during this period, while new properties coming to market fell 6.5%, indicating the ongoing challenge buyers are facing due to the lack of choice in the market.
ESPC said the highest price increases have been seen in West Lothian, where market activity has accelerated in recent months, fueled by demand for more space at a more affordable price than in Edinburgh. . In this area, sale prices for properties increased by 37.9% to £276,596. East Fife continued to see significant price increases, with an average sale price of £312,665, up 26.1% year-on-year.
Overall, Edinburgh saw average property sale prices rise by 6.4%, taking the average to £290,456. In the city centre, prices rose by 8.9% a year, to £353,189.
These figures confirm the idea that there is a significant imbalance between supply and demand in the Scottish housing market.
Demand always outstrips supply
The level of interest in properties from real estate buyers is still high and shows no signs of slowing down at this time. Signs sold increase within weeks or even days of certain properties coming on the market and we are not seeing any reduction in demand or prices. This leads to historically low levels of “inventory” available on the market for buyers, which in turn increases demand and pushes up house prices.
Sellers are continuing the trend seen in recent years of preferring to find their new home before putting theirs on the market, deepening the issue of market ‘supply’.
For buyers who favor the purchase of new housing, supply is also impacted by the reduced availability of certain raw materials, which has repercussions on the construction of new housing. This inflates demand for new construction and sees off-plan land sold months before completion. Our new construction legal team is currently concluding missives on properties that will not be available until mid-2023. This reduced availability of new construction properties, in turn, is driving demand in the property market. opportunity.
There are few signs of greater ‘supply’ in the market in the coming months, which means it appears to remain a highly competitive market for buyers. Hence the importance of putting yourself in the best possible position as a buyer…
Be a good buyer
With all of this in mind, it’s important to understand what you want and what you can afford in today’s economic environment and think about what can make you more attractive to a seller. Any small advantage can make the difference.
One of those benefits is being in a position where you can be flexible enough to meet a seller’s requirements on the date of entry. Having already sold or being a cash buyer can often outweigh a slightly higher offer from someone who has yet to sell their own home. The seller also knows that he does not have to wait for a linked transaction.
If you can consider selling or putting your property on the market first, it can give you a head start. This will also allow you to fully understand what your purchasing budget is. Under current market conditions, many properties are selling well above the official Home Report valuation, which will positively affect your budget and perhaps allow you to review properties that were previously not taken into consideration. account.
Although this can be a terrifying prospect, and one that is simply not possible for some sellers and buyers, we recommend that any property seller who is able to do so sell their own property before buying.
Renting for less than six months is now much easier than a few years ago due to changes in rental rules in recent years. Other options such as staying with the family for a short time or taking advantage of the AirBnB market during quieter seasons when landlords are more likely to expand good longer term leads are also options.
Here are more ways to put yourself in the driver’s seat as a buyer:
- Ensure you have the professional advice of an independent, expert and reputable mortgage broker who assures the seller that your mortgage “agreement in principle” (in other words, interim assurances from a lender that you qualify for a mortgage with him) is based on a professional appraisal rather than a brief internet search
- Make sure that the assets have already been liquidated and that the cash is available if you present yourself as a “cash buyer”
- Get in touch for an initial consultation with a law firm that specializes in buying properties for hundreds or thousands of buyers each year, who are experts in the Scottish market and can give you the best possible advice when you are in competition with several other buyers. You don’t want to Google “how do I submit an offer?” when you find your dream home and the closing date is the next day! MOV8’s dedicated buying team of four local market experts take care of this day in and day out and are happy to help.
We are here to help you
If you are considering buying or selling a property, MOV8 is perfectly placed to help you. The team of five-star real estate experts can guide you through every step of the ownership process.
If you are considering selling your home or investment property, contact MOV8 by calling 0345 646 0208 (Option 1) or emailing [email protected] to organize a free estimate of your home or to obtain a complete and transparent breakdown of the costs of selling your home.
If you are looking to buy a property as a home or investment please call 0345 646 0208 (Option 2) or email [email protected] And they will be happy to help you.
This article has been brought to you in association with Mov8