The first base rate decision under the newly elected government has been announced this lunchtime, presenting fewer surprises than the election itself. The base rate has unsurprisingly been held at 0.5% by the Bank of England, as the UK awaits the impact of unexpected majority rule for the next 5 years.
As the attention of UK contractors turns from the surprise majority of the Conservatives, to what this means for them personally, there has been much early speculation on what a majority government may do for the housing market and mortgage availability.
Taj Kang, Business Development Director at Contractor Mortgages Made Easy, examined the manifesto of the Tories, and tried to interpret what this could mean for home ownership and mortgage funding.
‘The housing market was a high agenda item in all of the manifestos of the political parties who were going to win seats in parliament, with the common theme being the build of new homes to address the housing shortage. The stand-out conservative proposal in their manifesto was around the biggest extension of ‘Right to Buy’, where council or housing association tenants could buy their own homes at significant discounts.
‘Contractors who are first time buyers and have been renting their home could potentially benefit from this pledge, as High Street lending options exist with lenders like Halifax, who welcome Right to Buy and flexible underwriting for contractors. Furthermore, the Help to Buy ISA that was launched pre-election by the Chancellor, could be a great way for contractors who haven’t owned before and who aren’t council tenants, to get their foot on the ladder with some state assistance towards the deposit.’
Kang went onto mortgage funding and prospects for increased credit availability to purchase property for those who need it most.
‘Mortgage funding is expected to rise in line with expectations issued by the Council of Mortgage Lenders at the start of the year. We can expect a slow but steady increase this year of circa 10%, with no dramatic changes in how mortgages are assessed around affordability. It will remain challenging at best for a contractor to be able to walk into their bank and get a lender to appreciate all of the income generated via the contract.’
Kang went onto summarise what contractors need to look out for in the coming months.
‘The movement of house prices will be key. If they start to accelerate rapidly again, now that there’s a majority Government; don’t be surprised if the Bank of England introduce new initiatives to curb mortgage lending. Mortgage rates will also come under pressure if the housing market continues to increase alongside increasing inflation. Low inflation is the main thing applying a brake to a base rate increase at present. Those contractors looking to remortgage should take stock of what they currently pay and compare this with what is currently available on the market, and most importantly take action to secure today’s rates.’
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
Tel: 01489 555 080