Property conveyancers were this week officially warned to brace themselves for a big fall in transactions.
The Council for Licensed Conveyancers (CLC) told members to expect up to a 40 per cent fall in business over the next few months.
Growing mortgage interest rates, a reduction in the number of mortgage deals available and fewer properties coming on to the market have all been blamed for the reduction by the Conveyancers body. Added to that is the rise in the cost of living, particularly food costs and escalating utility bills.
Conveyancing process still dragging down house sales
One mortgage broker countered the CLC claims, saying that the number of re-mortgages was rising and that many delays were often due to a slowdown in the conveyancing process itself.
So far mortgage interest rates have reached six per cent but the Bank of England base rate is expected to continue to rise above its current 2.25 per cent, pushing mortgage payments even higher. Average two-and five-year fixed rates are sitting at 6.55 per cent and 6.43 per cent respectively. Those are the highest mortgage interest rates since the beginning of the last big recession back in 2008, but economists are bracing themselves for another bank rate rise at the start of November.
Mortgage interest rates rising globally
The rise in interest rates were exacerbated by the Mini Budget introduced by then PM Liz Trust last month. They have started to fall slightly with the news this week that Rishi Sunak was to become the new PM. But it’s not just in the UK that mortgage interest rates have been rising. It’s become more of a global issue, prompting central banks in America, Australia, and other first and second world economies to increase bank rates to fight inflation.
Some housing market analysts are more optimistic about the property market than many economists. That’s because they say there are several points worth noting in its favour. This includes the expansion of the stamp duty threshold, which will help some individuals and couples – especially first-time buyers who don’t have to pay any stamp duty on property worth up to £450,000. A shortage of stock will continue to keep prices high, as will the fact there just aren’t enough New Build’s being put up to cope with demand.
Buy to let landlords not as badly hit
Many landlords may weather the rising mortgage interest rate storm by putting up rents. That’s providing tenants don’t default on payments because they are already having difficulty paying rent and buying food etc due to rising living costs.
The rental market is also expected to swell over the next few months. That’s because rising mortgage interest rates is expected to encourage first time buyers to wait before purchasing a property. That’s to see if house prices will fall, but mainly to give them time to save for a bigger deposit.
Other landlords – many of whom don’t pay self-assessment tax because they are registered as a limited company – can claim back the mortgage interest payments against their corporation tax bill.
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