housing, mortgage, UK

Growth in the housing sector has been an indicator of economic stability.  Owning a property not only unloads households of worries settling the monthly rent but also enables them to acquire wealth as property values increase.  However, with the 3% house price increase this year, there are not many dealings in the UK housing market recently.  Moreover, rise in interest rates does not build up the Brits consumer confidence.  Gradual rate increases on mortgage repayments is feared to diminish purchasing power in a couple of years.  The Brexit vote may affect growth as well though the effects are minimal.

In 2015, mortgage lending increased as borrowers cashed in on low interests rates.   Significant growth in the Buy-to-Let segment was noted, as this was considered the more reasonably priced mortgage.  Other sectors that boosted the market include loan-to-value mortgages and interest-only types.  State appropriations on lending and reduced interest rates of 0.5% in 2009 facilitated mortgage affordability as well.  Low five-year fixed mortgage sparked fierce competition among lenders and attracted more consumers to take advantage of other low-priced offers.  The lending boom led to market saturation and influenced hikes in house prices as well.

Despite future hikes in interest rates, high demand for mortgages is expected to remain.  Repayments on the other hand may decrease, as borrowers have difficulties settling up.  Lenders may as well double efforts in attracting new buyers as numbers dropped after the MMR implementation in 2014.  What matters is that borrowers could still manage account settlements despite probable rise in interest rates. Mortgage lending to new buyers improved by 10% in the past two years.  To sustain demand and encourage investments among first-time and old buyers, comprehensive financial evaluation of potential clients is recommended to enable them to make repayments.

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