It has been a busy few weeks economically and politically to say the least! What has been the impact on the local property market in Edinburgh and the Lothians?
Let’s quickly recap…
*That* mini budget caused a lot of turmoil. At the end of September, many mortgage lenders pulled mortgage deals from the market temporarily as they struggled to accurately price products amid the financial uncertainty caused because of Liz Truss’ mini budget. Since then, most lenders have reintroduced products and most of the policies of the mini budget have been scrapped.
We reported at the end of September that there were 2,340 residential mortgage deals available to applicants which was far fewer than the 5,315 offered in September 2021. This has risen again to a figure of 4,136 as of this week (26th October).
Will the interest rate rise again and how will this affect mortgages?
Whilst the interest rate will inevitably rise because of global economic pressure, it may be that over the coming months interest rates will be something of a rollercoaster. This week we did see mortgage rates coming down again, but they will likely rise with the new government’s valid intentions to curb inflation. We may see mortgage rates rise to between 4-6%. Between 1995 and 2022, the mortgage rate in the UK has been sitting at an average of 5.60% but over the past few years’ homebuyers have benefited from the lowest interest rates in living memory, so it is a bit of a tough pill to swallow – especially with the cost of living increasing at this time.
Mortgage rates will likely remain in limbo until we see what the Bank of England do with the base rate when they meet on the 3rd of November. Under Liz Truss’ brief premiership, economists were predicting a significant hike to the base rate, but with a little more stability from the government and the pound bouncing back a bit against the dollar, the rate may not increase by as much as some had thought, so it might be that more favourable deals are released to the market by mortgage lenders before the end of the year.
The national press continues to talk about property prices falling, but we have seen no evidence of this in Edinburgh and the Lothians. What we have seen is a direct effect on some first-time buyers who have had to recalibrate their calculations to ensure that mortgage repayments are affordable. In some cases, there are slightly longer sale times than earlier in the year and at closing dates, we may see five Offers rather than the ten+ we witnessed over the past two years of a supercharged market. Activity has simply reverted to similar levels witnessed in 2019, which was the best year in the property market post-recession and pre-pandemic supercharge! Seasonality also may be a feature of the market once again as we head towards Christmas, for the first time in many years.
Sessions and engagement on espc.com has remained steady throughout the past six weeks suggesting that overall interest in searching for property remains high and the market is still highly active. It is worth pointing out that this is above the traffic that they saw in 2019, the last “normal” year in the property market before the impact of the pandemic changed behaviours and then supercharged the market.
Neilsons’ October activity snapshot so far…
- 88 properties marketed this month so far
- 76 properties sold this month so far
- Over 800 viewing requests received for properties marketed – the buyers are still out there!
- 25 Closing Dates
- 150 Offers and 169 Notes of Interest (1st October – 23rd October inclusive)
- 131 properties purchased for clients in October so far
As you can see, the property market continues to keep moving, despite the economic rollercoaster.
Whilst the mainstream media may report doom and gloom for house prices over the next 12 months as clickbait, it is extremely unlikely that the historically resilient Edinburgh & Lothians market will suffer any significant loss to property values as demand continues to massively outstrip supply. Please do remember that the media do tend to be generalist and talk of a “UK wide property market” that does not exist – the UK is a patchwork of local markets each with its own unique dynamics. As a result of these articles in recent weeks and days, we believe some buyers are being misguided on suggestions of a “wait and see” approach with regards to the market in hopes of scooping up a better deal. This approach is highly risky and in many cases it is best to make a move now as seasonality around this time of year always means less competition in the run up to Christmas and there is the threat that interest rates may increase further in the near future.
Forward projections over the next 5-10 years for property values here are still very much on an upwards slant. It remains the case, as ever, when buying property to think about how long you’ll want to live there for and how your lifestyle needs might change in the future. Most who buy a home consider that they’ll live there for significantly more than 12 months. Whilst you might pay a higher interest rate on a mortgage, with a capital repayment and interest product you are still better off buying than renting and paying off someone else’s mortgage.
During these unpredictable times where everything seems to be changing weekly if not daily, it has never been more important to ensure that if you are buying and/or selling, you are taking up to date expert advice from the forefront of market activity. This is where Neilsons can help.