Mortgages are the sole reason most new and old homeowners can afford a home, as saving enough cash would take too long. So, as mortgages reach a new all-time high of 6.36%, it leaves those in the property sector to wonder how it will affect the market in general.
The drastic increase of mortgage rates means the loans have hit an all-time high since the previous during August 2008, and with 100,000 people per month coming to an end on their current mortgage contract, the high margins are expected to devastate.
One way that the government are expecting to reduce the pressure on homeowners is by the newly implemented cut to Stamp Duty Land Tax. Some of the changes are the following:
· No stamp duty on first £250,000, up from £125,000.
· First time buyers will see no duty on the first £425,000, up from £300,000.
“Interest rates are now at the highest level since 2008, meaning many first-time buyers will struggle to get on the housing ladder, so the cuts to stamp duty are a welcome change for this group, in particular…”
The cut to stamp duty softens the blow of mortgage increases but still leaves home owners in a tough situation as energy bills increase alongside of it. So, this leads the property sector to wonder what it can do in order to salvage this situation.
“The reduction in the number of mortgage products available since the mini budget is a cause for concern, especially for first-time buyers. Now is the time for lender innovation to ensure that the continued demand can be catered for.”
Although mortgages play a large part of the decision to buy a home, investing in property with high yields can be a substantial way to gain greater capital appreciation. It also solves the issue of supply vs demand. The cut to stamp duty does lessen the impact for homeowners, but the need for affordable accommodation is at an all-time high also.
Whilst an investor can purchase a property due to their diverse portfolio, it opens up the opportunity to provide affordable rented accommodation for those that have now been priced out of homeowning via mortgage.
This places the investor in a positive position. Purchasing property in an area with high yields will gain great capital appreciation, however, it also helps solve the ethical problem of housing supply and demand.