Predictions for The Housing Market

10/02/2020 by

Ray Boulger, our Senior Mortgage Technical Manager, shares his predictions for 2020 regarding the housing market, Brexit and consumer confidence. 

Video Breakdown:

0:19 – What Are Your Predictions for the Housing Market in 2020?
1:04 – What Are Your 2020 Predictions Regarding Brexit?
1:58 – How Do You Think Consumer Confidence Will Be Affected as a Result of Brexit?
2:37 – Any Further 2020 Housing Market Predictions?
3:13 – Will There Be Any Changes with Help to Buy?
4:13 – How Do You Feel About the Recent Changes at Nationwide?
6:25 – Summary

View Transcript

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  • What are your predictions for the Housing Market in 2020?

Following the general election results I anticipated we see a pickup in activity in the housing market and indeed in prices but didn’t really expect to see that until we left the EU or about the time, we left the EU.

What’s actually happened is that confidence seems to have returned even quicker than I expected following the general election results. So, we’ve seen increased activity in the market even before Christmas are all the signs, I think now are that we will see a rather bigger increase in activity in house prices than I anticipated. So, I have previously been suggesting a house price increase of 2% to 3% in 2020. I think now probably 3% to 4% is a better guide.

  • What are your 2020 Predictions Regarding Brexit?

The recent comments about Brexit, at Davos are actually quite interesting. There appear to be conflicting comments in terms of this trade deal with the US, but the most recent comments are suggesting that Trump is really keen to get a trade deal done this year and clearly with the US elections in November, he’s going to want to get that done before the election, not least in case he loses which I suspect he will. So, I think that bearing in mind any negotiation of any country with the EU because it involves 27 countries, it’s always going to be far more difficult than negotiating with a single country like the EU. I expect the UK to do a trade deal with the US, that is sensible and will be achieved prior to any US trade deal with the EU.

  • How do you think consumer confidence will be affected as a Result of Brexit?

Following the general elections, it would appear from figures that have already come out that there has been a marked increase in consumer confidence, and I think getting Brexit done to use Boyce’s term will merely help that. As we go through 2020 and more information comes out in terms of negotiations, as long they are broadly positive, I think it will be, that’s going to be helpful. So, yes, I expect to see consumer confidence pick up during the year, and that’s clearly going to be helpful for the housing market as well as the general economy.

  • Any Further 2020 Housing Market Predictions?

As well as the increase in house prices, I think what’s equally important is the number of transactions. Now after a huge drop-in activity in the housing market during the financial crisis we saw a reasonable pickup in activity until 2016 since when there’s been a small reduction in the number of housing transactions every year. This year for the first time in four or five years we will actually see an increase in housing activity not a big one but an increase and that’s helpful.

  • Will there be any changes with Help to Buy?

One negative is going to be the changes to the helped by second charge equity share scheme which come into force in April 2021, at that stage the maximum purchase price available outside London will be reduced and that calculation is being based on regional price caps the effect of which will be that anybody wanting to buy a property in many of the large towns and cities in the UK, in fact in England because the scheme only applies England, will find that apart from buying a one-bed flat or a studio apartment they probably won’t be able to use to help buy scheme in many of these areas. So, if anybody is looking to buy a property in the major towns and cities, I would recommend that they actually bear in mind they’re going to need to complete by April 2021, if they’re using out by the scheme, of course.

  • How do you feel about the Recent Changes at Nationwide?

We’ve seen an interesting announcement from Nationwide, which says that they are going to use the new rules announced by the Financial Conduct Authority to assess affordability on a more conservative basis where people are doing a pound-for-pound remortgage. So, this will not apply to people who are looking to remortgage and increase their borrowing, and it will not apply to people purchasing a property. But anybody who is simply doing a plan to primary mortgage will now in some cases be able to borrow more money from Nationwide, and that may mean that a mortgage with more than acceptable to Nationwide in the past will now be one that Nationwide prepare to offer. Just to put a few things in context here what the Bank of England requires lenders to do is assess affordability at the revert to rate, normally start the variable rate plus 3%, which means that for most of the big lenders affordability is assessed at 7.25% despite the fact that everybody, even people with relatively bad credit can borrow money significantly cheaper than that, and the long term interest rate trends suggest that that’s going to be the case for some time. So, most lenders believe that the Bank of England’s stress tests are much too onerous, and I think that Nationwide have done very sensibly is to use the new FCA rules to actually use a more conservative assessment but one which nevertheless still allows for a significant rise in interest rates this will give some people an extra option for remortgaging, so anybody coming to the end of their deal should be looking at a product transfer from their existing lender or remortgage and in some cases this opens the door to an extra opportunity for people they wouldn’t have had before. Well, I suspect it will also mean that other lenders who perhaps haven’t been looking to actively using these new rules will now do so, bearing in mind that the amount of mortgage lending this year is not expected to rise very much, so anything that gives one lender a competitive advantage is going to be looked at quite carefully by other lenders.

  • Summary

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