The property boom cannot last.
House prices have skyrocketed, with annual growth hitting 7.3pc as of September 2020. But the boom is completely out of sync with current economic conditions and the looming recession. Analysts are warning it cannot last.
With a second lockdown on the horizon which threatens to contain Brits in their homes once again and the stamp duty holiday coming to an end in March 2021, people are itching to move. Lockdown has caused some people to reassess their living situations which has resulted in the desire for some to move. They want increased space, bigger gardens and more rural settings.
Despite the fact that a second lot of tight restrictions imposed by the government risks leaving many unemployed and unable to repay their mortgage, highlighted by the need to bring in mortgage holidays in recent months, so far they have only added fuel to this fire to make a move. As Isabelle Fraser, editor at Telegraph Money writes,
‘this will only increase competition and push up sales values; one in seven properties is selling for higher than asking price. This will mean further to fall when the economic fallout hits home’
Bidding wars are cash strapped first time buyers worst nightmare. They have already been reprimanded by banks withdrawing loans for those buyers with small deposits. Ministers are wading in though, with Boris Johnson announcing this week that he intends to turn “Generation Rent into Generation Buy”.
His master plan is to get banks to offer long-term, fixed-rate mortgages of up to 95pc, allowing young people to get on the property ladder with just a 5pc deposit. In theory, this sounds like positive news, however there are some potential drawbacks to the scheme.
It will mean overturning requirements placed on lenders after the 2008 banking crisis. The government have suggested that to combat this risky lending with using taxpayers funds to guarantee the loan. However, many tax payers have had enough of their money being used to pay back loans. There is also concern that homeowners with such a small deposit amount will fall into negative equity, not to mention the cladding crisis which will cripple the market if not solved quickly.
But for renters stuck in tired and cramped homes, any way out may seem like a better option; even if it means chaining themselves to mortgage repayments for years to come.
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Composed by James Snape. For further enquiries I can be contacted on 07960 481 205.