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What next for the housing market in 2016?


The dust has settled on the housing market: the general election is out of the way, along with the threat of a mansion tax, and the stamp duty changes announced at the end of 2014 have had time to bed in. Towards the end of 2015, we have seen a pick up in number of transactions at the top end of the market – a trend we expect to see in 2016.

The stamp duty changes were devastating for the £2m-plus market but where vendors are prepared to meet the buyer halfway, deals will be done. Many vendors had unrealistic expectations in terms of what prices could be achieved after the election and those who are serious about moving will need to negotiate in 2016.

Older borrowers will be at the top of the agenda, with pressure on lenders to be more flexible. We are likely to see more bridging among older homeowners, using this as a way of trading down – enabling them to buy a smaller property, move in and then sell their original home without time pressures, before repaying the bridging facility.

We are still awaiting the first interest rate rise in several years but we still don’t think it will happen in 2016. With lenders keen to lend we expect to see a continuation of the competitive mortgage products borrowers have enjoyed this year. We expect the year overall to be a strong one, with an increase in lending volumes on 2015.

Following considerable growth in property values, 2015 will be more subdued but we still expect growth of around 5 per cent across the mainstream UK market.

Jonathan Harris
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Jonathan Harris

Strong finish to the year on lending front, says CML


November’s lending volumes are likely to be lower than what was an incredibly busy October but are still well up on the same period last year, pointing to a sustained recovery in the market, according to the latest figures from the Council of Mortgage Lenders (CML).

While some other indices are pointing to aggressive growth in the housing market over coming months, the CML forecasts a gentle improvement in activity. This is more realistic and is likely to be more sustainable. Fundamentals remain strong, such as low inflation, rising wages, more jobs and competitive mortgages, which will support the market.

However, borrowers are likely to become increasingly concerned about rate rises, particularly with the Fed finally taking the plunge and increasing rates. This will focus the minds of those who may have been delaying remortgaging and we expect more people to opt for a fixed rate in the first half of the year.

The biggest challenge for borrowers is meeting lenders’ affordability criteria, as property prices continue to rise in many areas while wages fail to keep up. First-time buyers will find it difficult to get themselves in a position to buy unless they have assistance from the Bank of Mum and Dad. This should keep a lid on the market and ensure we don’t return to runaway growth.

Jonathan Harris
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Jonathan Harris