Predictions 2018…..

……but first a look back to what we predicted for 2017! 

Before we look forward to 2018 we wanted to start by taking a look back! At the end of 2016 we made some predictions for how the mortgage market would fair during 2017, so how did we do?

Despite the uncertainty of Brexit, 2017 house prices have shown modest increases of 5.4%*, exactly as we predicted. We suggested that the Chancellor would reduce stamp duty to stimulate the market in his Spring budget, however we had to wait for the Autumn budget to see him reduce stamp duty for First Time Buyers only.

We predicted correctly that inflation would finish at around 3 – 4% at the end of 2017, and the current rate at time of going to press is 3% – the highest seen since 2012. We knew that Bank of England governor, Mark Carney would tolerate high inflation to prevent a base rate rise and thought that we would not see a rise in 2017, however, on 2nd November we saw a quarter percent rise, for the first time in over a decade.

We also commented that SWAP rates were rising and therefore we thought fixed rate mortgage rates would rise – again we were accurate as swap rates rose sharply in September and as a result the fixed rate market increased their rates.

Finally, with so much of our business being in the Buy to Let arena, we were concerned that the changes to landlord tax relief would impact the market, and this prediction was correct. Before the changes in March 2016 the activity levels were roughly 1:10 mortgage transactions by Landlords. By August the comparable figure was closer to 1:17.**

So what do we think 2018 will have in store for the mortgage market?

With the Brexit divorce still 18 months away, there will be a great deal of uncertainty which the policymakers with do their best to deal with. Fundamentally, the economy will see depressed growth compared to what might have been, although pent up demand will come through in time.

The Bank of England Governor, Mark Carney has offered many reassurances that rate rises will be slow and with the latest increase hoping to slow inflation, it is unlikely that we will see a rise in the first half of 2018. However, to keep inflation within the agreed targets we predict that the next rise could come in the third or fourth quarter of 2018.

Lenders want to remain competitive but with upward only pressure on rates, we predict that fixed rate products will rise, although gradually, throughout the year.

Following the Chancellors abolishment of stamp duty for first time buyers up to £300,000, we predict that we will see lenders taking the initiative and promoting their FTBs propositions. Further up the housing ladder, high move costs and low age growth continue to subdue activity, with many choosing to improve current homes rather than move. We therefore predict that gross lending figures overall are unlikely to change by much if at all although the remortgage market will be active.

House prices will continue to rise above inflation in 2018 as the relatively few properties up for sale are bid up by the growing number of potential buyers. We predict that there will be modest momentum and the House Price Index will grow by approximately 5% in 2018.

An interesting development within the housing and mortgage market will be the government policy towards housebuilding and planning and we will be watching with interest to see early signs of how it manifests.

In summary 2018 will be remembered as a transitionary year as we move to toward the conclusion of Brexit. That said, we believe that some sort of event which might stop the Brexit in its tracks is not out of the question.

*Land Registry House Price Index figures as at 30th November 2017

**UK Finance as at 30th November 2017


Share this article: