There has been some interesting data released this week which all has an effect on the economy; but what does it mean for those of us with an eye on the housing market?
Inflation has fallen this month to 2.6%, this is the CPI (Consumer Prices Index) measure and it is down from 2.9% in May. Historically the fiscal measure to try and stem inflation would be to raise interest rates but as I’ve said before these are not normal times. Since the financial crash of 2008 interest rates have been super low and inflation has rollercoastered its way along. It seems like other factors are effecting inflation, the value of the pound for example can have an impact. If you need to import goods to produce your product and the pound is weaker than before then you are going to increase prices. I think this has been the main driver in pushing inflation since the Brexit vote of June 2016.
With this slight drop in inflation perhaps we are seeing a levelling off or a “settling down’ as Bank of England Governor, Mark Carney, said last month.
The fact inflation has fallen a little does ease pressure on the Bank of England to raise rates and perhaps just sit out the Brexit negotiations and see what they bring. The Brexit negotiating period may well be a challenging time for the British Economy.
As I have repeated many times in my blog, keep an eye on wage inflation. This is still low and until it outstrips inflation then I can’t see a significant interest rate rise.
So with interest rates set to remain low for now what does that mean for house prices?
Well, interest rates are not the only factor in house prices. As my old economics teacher once said, “all you need to know is supply and demand and you’ll pass your exam” (he wasn’t entirely right on that one!). However housing is all about supply and demand. In the UK we have a housing shortage, more people want a house than there are houses, to put it simply. Therefore this demand for housing will keep pressure on the prices and cause them to rise. In June, RICS reported growth had slowed to 4.7% year to date. Slowed, but prices still rising.
On top of this if you factor in the report earlier this month that said estate agents have the lowest stock of properties since 1978. As always prices do see regional variation. If we look here in Surrey I can see low availability and high demand for areas within commuting distance of London with good schools, and I just can’t see prices falling in those areas.
So if you are selling in theory you should get a good price for your property, if you are buying expect to pay at the top of your budget.
With interest rates low, now’s a good time to review your current mortgage arrangements and see whether you can get a better rate by remortgaging. If you’re looking to move house and require a mortgage, you will also need to explore what mortgage lender’s are prepared to lend you to enable your purchase. If you require any support finding the right mortgage product, or would just like to talk through your options, call me on 01252 759 233 or email firstname.lastname@example.org