Welcome to NestInsights, your guide to the evolving UK property market. In this blog series, we explore the latest property news and developments that shape the sector, offering you the insights needed to navigate and thrive. Our goal is to provide a comprehensive overview that empowers you to make well-informed decisions in this dynamic market.
Table of Contents
Lenders Slash Mortgage Rates Amid Intensifying Market Competition
Estate Agency Owner Receives Three-Year Letting Ban in Landmark Ruling
Major Merger Announced Between Leading Property Portals
Chancellor to Introduce 10-Year Social Housing Rent Plan in Upcoming Budget
Economists Predict Further Interest Rate Cuts by the Bank of England
Calls for Stamp Duty Reform to Stimulate the Housing Market and Economy
UK Property News Week 34
Lenders Slash Mortgage Rates Amid Intensifying Market Competition
The mortgage market is currently seeing heightened competition as major lenders continue to slash interest rates. Barclays, HSBC, TSB, and Virgin Money have all announced rate reductions in response to a decline in the City wholesale swap rates, which set the price for fixed-rate mortgages.
For example, Barclays cut 0.15% off many of its deals, bringing the rate on a two-year fixed-rate mortgage for those with a 15% deposit down to 5.07%, a significant reduction from the previous rate of 5.22%. Meanwhile, TSB has trimmed up to 0.25% off its two-, three-, and five-year fixed-rate deals.
These rate cuts are a direct result of recent movements by the Bank of England, which reduced the base interest rate to 5% in August 2024, following 14 consecutive rate hikes since 2021.
The anticipation of further interest rate cuts has created a favorable environment for mortgage lenders to become more aggressive in their pricing. With banks and other financial institutions vying for market share, borrowers—both homeowners and investors—are set to benefit from more competitive rates.
However, while the trend is encouraging, particularly for first-time buyers and those looking to remortgage, the current rates are still significantly higher than the pre-pandemic era.
For instance, the average five-year fixed-rate mortgage currently stands at 4.97%, still nearly double the rate of 2.51% seen in July 2021.
This mortgage rate war is expected to continue as lenders aim to capitalize on market momentum, with experts forecasting an exciting end to the year for anyone looking to secure a favorable deal. As lenders compete to offer the most attractive packages, the market's overall outlook remains optimistic.
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Estate Agency Owner Receives Three-Year Letting Ban in Landmark Ruling
In a landmark case, Southend-on-Sea City Council secured a three-year banning order against estate agency owner Ruhul Shamsuddin, marking the first such order in Essex. Shamsuddin, who operated several companies, including Lordsons Estates, was found guilty of severe housing code violations that endangered tenants’ safety.
The First Tier Tribunal issued the ban, which prohibits him from engaging in any letting agency work, managing properties, or letting properties across England.
The council's investigation uncovered dangerous living conditions, including significant fire safety breaches, severe overcrowding, and disrepair across properties managed by Shamsuddin's firms. Multiple inspections revealed properties with no fire escape access, inadequate heating, and significant mold issues. Council officers had to intervene to rehouse families living in these hazardous environments.
Major Merger Announced Between Leading Property Portals
In a strategic move set to reshape the property landscape in Northern Ireland, two of the region's largest property websites, PropertyPal and Propertynews, have announced a merger. This merger follows the acquisition of a stake in PropertyPal by Cecil Hetherington, founder of Used Cars NI, earlier this year, with Hetherington assuming the role of chairman .
The merger is expected to bring significant benefits to the real estate market. Both websites will continue to operate as distinct brands but will share resources, including upgraded technology infrastructure and enhanced marketing strategies aimed at providing better service to agents and consumers. The combined entity plans to create a more user-friendly experience and foster innovation within the sector.
Jordan Buchanan, CEO of PropertyPal, highlighted the positive impact of the merger, stating, “This merger is very positive for our people, our customers, and our website users. We are bringing together the best of our technology, people, and cultures to create something even better. Our aim is to enhance the value we offer to consumers and agent partners alike” .
Chancellor to Introduce 10-Year Social Housing Rent Plan in Upcoming Budget
Chancellor Rachel Reeves is set to unveil a landmark 10-year rent settlement for social landlords in the upcoming Autumn Budget on October 30, 2024.
This proposal aims to stabilize rent increases in England, tying them to the Consumer Price Index (CPI), which currently stands at 2.2%, plus an additional 1%.
The plan is part of a broader government effort to increase funding for the construction of more affordable homes, reversing former Chancellor George Osborne’s decision to abolish a similar settlement in 2015.
The 10-year plan has been widely welcomed by industry leaders, with Ian Fletcher, director of policy at the British Property Federation, noting that it could provide the certainty and stability that long-term investors, such as pension funds, require.
These investors often seek reliable returns that match their long-term liabilities. Fletcher also pointed out that the plan could effectively act as a form of subsidy by allowing the sector to raise capital at lower rates.
Industry experts, including Fiona Fletcher-Smith, chair of the G15 group of large housing associations, have hailed the proposal as a significant first step towards boosting the delivery of affordable homes across the UK. However, she emphasized the need for this plan to be part of a more comprehensive strategy to address the broader social housing crisis.
This long-term commitment is seen as essential for increasing valuations within the social housing sector and encouraging further investment. However, experts stress that it must be implemented with the assurance that the revenue will be directed towards both improving the energy efficiency of existing housing stock and delivering new affordable homes.
Economists Predict Further Interest Rate Cuts by the Bank of England
The Bank of England (BoE) is expected to make further cuts to its base interest rate as 2024 progresses, following an initial reduction in August.
After 14 consecutive rate hikes that brought the rate to a 16-year high of 5.25%, the Bank recently trimmed it to 5% in a closely divided 5-4 vote by the Monetary Policy Committee.
Many economists are forecasting at least one more cut by the end of the year, with the majority anticipating a drop to 4.75% in November.
The prospect of continued interest rate reductions has spurred optimism within the property market, as lower borrowing costs could encourage increased activity among buyers. Data from Rightmove showed a 19% year-on-year rise in buyer inquiries in August 2024, compared to an 11% rise in July, reflecting the positive impact of the initial rate cut.
While most economists agree that the BoE will reduce the base rate again before the year ends, opinions vary on the extent of the cuts.
A Reuters poll indicated that while 65% of economists expect one more reduction in 2024, some believe that there could be two or more cuts, bringing the rate down to 4.5% by December.
Looking ahead, further reductions are expected in 2025, with the base rate forecast to fall to 3.75% by the third quarter. The BoE’s rate cuts are intended to alleviate inflationary pressures while stimulating economic activity, particularly within the housing sector.
For prospective homebuyers, this environment presents a significant opportunity. Although mortgage rates remain higher than pre-pandemic levels, further rate cuts could reduce the burden of borrowing, making home ownership more attainable.
The average five-year fixed mortgage rate in July 2024 stood at 4.97%, a considerable decrease from the 6.11% peak in 2023.
Calls for Stamp Duty Reform to Stimulate the Housing Market and Economy
There is growing pressure on the UK government to reform Stamp Duty Land Tax (SDLT) in an effort to stimulate both the housing market and the broader economy.
With homebuyers paying a total of £1.2 billion in stamp duty in July 2024 alone—up from £1 billion a month earlier—the tax burden is becoming increasingly difficult to ignore.
The current rules, which include a nil-rate band for properties valued up to £125,000, are set to revert in March 2025. This change will lower the threshold for first-time buyers, requiring them to pay SDLT on any residential property costing over £300,000, down from the current level of £425,000.
As a result, the average tax bill for homebuyers is expected to rise significantly—from £2,768 to £5,268, according to predictions.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, highlighted the challenge, stating that:
The Treasury is taking in huge sums of property taxes while homebuyers are racking up the debt.
He emphasized that a significant stamp duty bill can drive buyers to borrow more to cover the tax, exacerbating financial pressures.
Many industry leaders believe that reducing SDLT could provide much-needed relief to the housing market. Stinton pointed out that the stamp duty holiday of 2020-2021 proved that tax breaks for homebuyers do not necessarily lead to a drop in government revenue.
He suggested that reducing the burden of stamp duty could spur additional spending in the economy, particularly in the retail and home improvement sectors.
As the Autumn Budget approaches, the government faces a critical decision: balancing the short-term impact on tax revenue with the potential long-term benefits of a more vibrant housing market and a stronger economy. Reforming stamp duty could be the key to unlocking these gains.
Takeaways
Lenders Slash Mortgage Rates Amid Intensifying Market Competition: Major lenders have cut mortgage rates in response to falling swap rates, benefiting borrowers amidst heightened market competition.
Estate Agency Owner Receives Three-Year Letting Ban in Landmark Ruling: An estate agency owner in Essex has been banned from letting or managing properties for three years due to severe housing violations.
Major Merger Announced Between Leading Property Portals: PropertyPal and Propertynews in Northern Ireland have announced a merger aimed at enhancing technology and services while maintaining their distinct brands.
Chancellor to Introduce 10-Year Social Housing Rent Plan in Upcoming Budget: The Chancellor will introduce a 10-year rent settlement for social landlords, aiming to stabilize rent increases and encourage affordable housing development.
Economists Predict Further Interest Rate Cuts by the Bank of England: Economists forecast that the Bank of England will reduce interest rates further, following a recent cut to 5%, potentially lowering rates to 4.75% by year-end.
Calls for Stamp Duty Reform to Stimulate the Housing Market and Economy: Industry leaders are urging the government to reform stamp duty to ease the tax burden on homebuyers and stimulate economic activity in the housing market.
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