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After a year of surprises, it seems almost foolish to try and make predictions for 2017.
We are still getting used to the shock election of Donald Trump as president of the US, while the impact of the British public’s vote to leave the EU is still far from clear. If there is one thing 2016 taught us, it’s is that anything can happen.
In this context, trying to make forecasts about micro-movements in house prices and mortgage lending is extremely difficult. Let’s remember that earlier this year the Royal Institution of Chartered Surveyors urged its members to caveat their reports with a warning that it was almost impossible to accurately pinpoint valuations in light of the unknown effect of Brexit on house prices.
However, there are a few areas in which we can be relatively confident about making predictions.
Gross lending figures, for example, are unlikely to change much from 2016. All of the factors that have caused the market to be somewhat flat in the second half of this year remain.
Brexit is still causing uncertainty across the market – something which is only going to continue if and when Article 50 is triggered. We may see lending fall slightly but the record-low interest rate environment in which we find ourselves will continue to encourage homeowners to remortgage and this will support the overall lending figure.
We doubt there will be any movement in interest rates over the next 12 months. We won’t see another cut; the MPC and the Bank of England will be aware that a reduction of rates now smacks of desperation.
With rising inflation there are obviously calls for a base rate rise,but BoE governor Mark Carney has already made it clear he is willing to tolerate this. Inflation may edge up during the second half of the year and could finish 2017 at around 3 per cent to 4 per cent.
House prices will show modest increases of around 5 per cent. The government has made it clear the housing market remains a priority with investment in house builders and infrastructure announced in the Autumn Statement and we are likely to see further fiscal measures in the spring Budget. The Chancellor will be looking to stimulate the market and we could well see a reduction in Stamp Duty – something which was called for but not addressed in November.
Buy-to-let will, of course, take a hit as the changes to landlord tax relief come into effect. Lenders will continue to develop their limited company offerings to address this but undoubtedly we will see some investors leaving the market.
All in all, 2017 could be a good time to buy; prices will be realistic and interest rates low although fixed mortgage rates will start to edge up in the new year as a result of rising SWAP rates.