As I write this, it has just been announced that the UK’s rate of inflation has unexpectedly fallen to 1.7% in the year to September, the lowest rate in three and a half years and below the Bank of England’s 2% target. Will this have any effect on the housing market?
The quickest and simplest answer is ‘yes’ – it clearly cannot hurt. A lower rate of inflation should, in theory, mean that everybody has more money in their pockets and more money to spend should mean that moving house becomes easier for those wishing to trade up in the market. It should, however, be noted that the fact that the rate has dropped does not mean that the price of goods and services are coming down, it is just that they are rising at a slower pace, but this should still help people’s spending power.
The secondary, and almost inevitable, impact of the unexpected news is that it will help to persuade the Bank of England to put into place a reduction in interest rates. A cut in the rate of interest has already been widely predicted, but a low rate of inflation should strengthen the case, and indeed, some analysts are now predicting two cuts in interest rates before Christmas, one in November and one in December.
Whilst this is bad news for those relying on their savings to provide an income, it should also lead to lower loan, credit card and borrowing rates with mortgage rates also likely to fall and this will, in turn, help the housing market as lower mortgage rates always assist buyers when they are looking to move.
Whether or not this will prove to be a long-term advantage remains to be seen, as it is assumed that the rate of inflation will increase with, amongst other influencing factors, household energy bills shortly due to increase. However, the confidence levels in the market will undoubtedly rise in the short term and, historically, high confidence levels remain unabashed until a major external factor hits. Let us see what the New Year brings!
So, if the housing market is strong for buyers and sellers, what is happening in the rental sector? Good news is all I can report! Our lettings department is continuing to go from strength to strength. In recent months we have seen ‘off market’ rental agreements signed on properties that generate over £60,000 of rental income per calendar month in total. ‘Off market’ lettings is an area that we have been developing for some time, as in the upper end of the rental market there are many landlords and tenants alike that value their privacy and discretion is, therefore, the way forward. If you feel that this type of service would be beneficial to you, please call Andy Roberts, a co-director of Berriman Eaton and head of our Lettings Department, who will be happy to help as this is his specialist field.
My only caveat to the above is that, at the time of writing, the budget is nearly upon us, and I wait with bated breath to see if anything unexpected is announced that will affect the market. If it does, I will no doubt discuss it in my next article for this magazine!
So, as Christmas fast approaches, we are in the unusual end of year position of expecting a busy market in the traditionally quiet end of year season as the benefits of lower mortgage rates begin to be experienced.
As always, if you are thinking of selling your home, or indeed have a property to rent, please do not hesitate to give us a call!
