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Mortgage rates and house prices 

by Madaline Dunn

While Liz Truss recently announced a U-turn on one of the most unpopular items in the mini-budget, scrapping the 45p rate on the highest earners, the effect of the emergency budget has been wide-ranging and is having a huge impact on the housing market.

Breaking news about house prices, mortgage deals and interest rates have hit the headlines, with the UK in financial turmoil. In the hubbub of it all, it might be hard to know where you actually stand, and it’s understandable to be concerned about what the news means for you and your home or housing dreams.

At The Salary Calculator, we’ll explain:

• How interest rates have been affected by the recent budget and what’s going on with mortgage deals
• How house prices are faring
• What the experts are advising

Interest rates and mortgage deals

The Bank of England raised interest rates from 1.75% to 2.25% in September, and following the announcement of the mini-budget, there were predictions that the Bank of England could be forced to raise the base interest rate to 6% next summer. This resulted in nearly 1,000 mortgage packages being pulled overnight from the British market. According to Moneyfacts, 935 out of 3,596 mortgage products were wiped between Tuesday and Wednesday, doubling the record high of 462 back at the start of the lockdown.

This week, it has been announced that the UK’s largest mortgage lenders are putting deals back on the market but also raising rates once more. Moneyfacts outlined on Tuesday that the average new two-year fixed rate jumped to 5.97% – this is despite having already risen to 5.75% on Monday. Halifax, part of Lloyds Banking Group, for example, announced on Wednesday that it would be updating the rates on its homebuyer mortgage rates. The result is that its rate for a two-year fixed deal for a customer offering a 25% deposit is up from 4.61% to 5.84%, while a five-year fix with the same deposit will now stand at 5.44%, and a ten-year fix will be at 5.34%. This is similar across the board.

Alongside those trying to enter the housing market, around 1.8 million fixed deals are scheduled to end next year, meaning that many people are going to be faced with high costs when it comes to taking out a new mortgage.

Of course, the news has been devastating for millions. New research by Property Rescue, which considered the perspectives of over 1,000 UK-based homeowners, found that over a third of homeowners are worried they may have to choose between heating bills and mortgage payments. Not long ago, there were reports of people having to choose between food and heating; now, the roof above their heads is in question. The study, conducted by Perspectus Global, found that 41% will now have to turn to their savings, and 21% believe they may have to sell their homes due to skyrocketing mortgage interest rates.

Speaking to those who are concerned about their mortgage prospects, Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “Seeking advice from an independent broker would be wise, especially for those borrowers who have not yet started the mortgage process and are deterred by the level of choice and much higher mortgage rates than they were perhaps anticipating.”

House prices to fall

While statistics had recently shown that average asking prices were 8.7% higher in September than a year ago, following the mini-budget fiasco, house prices are now projected to fall, at least in London, according to estate agent Knight Frank. Specifically, the agent predicted a fall in the average house price by 10% over two years. Similarly, Capital Economics predicted that “despite the reduction in stamp duty,” this is the beginning of the most “significant correction” in house prices since 2007. They added: “The sharp rise in interest rates now expected means that prices are more likely to fall by 10-15% than the 7% we previously anticipated.”

Pantheon Macroeconomics senior UK economist Gabriella Dicken, on the other hand, while projecting a more conservative fall in house prices, said it “was the start of a prolonged fall in house prices” and that she expected “house prices to fall by around 5% over the next 12 months”.

Discussing the recent impact on interest rates and mortgage deals, Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “It’s difficult to see this as anything other than a sign of things to come, as these pressures raise the risks not only that price rises stagnate, but that they begin to fall. There is the chance that we could see a significant correction in the coming months.”

What are the experts advising

With so much uncertainty around the housing market, some mortgage experts are advising those on a fixed rate with a term of 18 months or less to reach out to their broker and consider their remortgage options. Meanwhile, Martin Lewis says that people should only overpay if their mortgage rate is higher than the rate they’d earn saving: “As a simple example, £10,000 in savings at 2% earns £200 for the year, yet use it to overpay a 3% mortgage and it reduces costs by £300 for the year. Effectively overpaying is tax-free ‘saving’ at the mortgage rate, so if the rate’s higher than savings (after tax) it wins,” he said.

For those entering the housing market for the first time, Chris Sykes at Private Finance, a mortgage broker, said it’s important to make sure your finances are in order and your credit score won’t let you down. He explained: “Borrowers need to be careful in tough times, as something as small as getting a CCJ [county court judgment] by refusing to pay a £60 parking fine, or missing payments on utility bills after moving out of a property, can affect the lenders at a borrower’s disposal, and affect their interest rates if these were recent and they have little other credit presence.”

Ultimately, make sure to think things through and access independent advice before you jump into any decisions related to your mortgage and housing. Moreover, if you’re struggling with mortgage payments, reach out for help as soon as you can. The likes of  Citizens Advice, StepChange, or National Debtline can be of help here.

Tags: cost of living, house prices, housing market, interest rates, mortgage deals

A guide to house prices across the UK

by Madaline Dunn

House hunting is exciting and often symbolises a new start, and adventure. That said, it can be somewhat overwhelming reviewing house prices, especially considering that global house prices are rising at the fastest pace since 2005.

According to Halifax, house prices shot up by 10.3% over the last year, with an increase to £287,440 on average!

But, don’t worry, at The Salary Calculator, we’ll walk you through:

• Some of the housing market trends right now
• Whether now is a good time to buy a house
• Where the cheapest house prices are
• Where the most expensive house prices are located

What are some of the housing market trends right now?

For those looking to break into the housing market in the UK, there are a few things you should know. In August, house prices jumped 7.1%, a record high, with more demand for greater space and a trend towards more home-working pinned as the reasons behind increased buyer activity.

In relation to this, following the pandemic, more and more people are looking to move out of cities, and now there is reportedly greater demand for rural areas. A survey from Royal London revealed that when movers were asked about their ideal living locations, 46% of Londoners said rural areas, while this figure was 45% in Manchester and 42% in Liverpool.

Andrew Asaam of Halifax said: “It’s clear from speaking to our mortgage customers that many have prioritised space over location as a result of more time spent at home over the last year and a half. We’ve seen evidence of this in areas right across Britain, with house price growth in the vast majority of cities now being outstripped by increases in their surrounding areas.”

Is now a good time to buy?

According to the experts, house prices are pretty pricey right now, and there’s been a month-on-month increase in price. Nationwide House Price Index found that in August 2021, the average house price stood at £248,857, which was 2.1% higher than in July. Demand is also high, meaning there’s a bit more competition.

Robert Gardner, Nationwide’s Chief Economist, says demand is likely to remain solid: “Consumer confidence has rebounded in recent months while borrowing costs remain low. This, combined with the lack of supply on the market, suggests continued support for house prices.”

Meanwhile, speaking to Woman and Home, Chris Salmon, a property expert said that a large price drop is unlikely to happen in the next few months: “For the most part, they will remain largely the same as they are now. Although the Stamp Duty Holiday fully ends at the end of September, only a small amount of properties are affected by that, not enough to see a significant drop in house prices.”

Where are the cheapest house prices?

If you look at the UK by region, some of the cheapest places to buy a house are:

• Scotland: Average house price: £206,359
• Yorkshire and The Humber: Average house price: £207,106
• North East: Average house price: £213,091
• North West: Average house price: £228,307
• East Midlands: Average house price: £250,946

Meanwhile, by city, some of the least cheapest spots to buy a house are:

• Hull: Average house price: £156,424
• Carlisle: Average house price: £163,232
• Bradford: Average house price: £164,410,
• Sunderland: Average house price: £179,567
• Inverness: Average house price:£191,840
• Glasgow: Average house price: £196,625

Where are the most expensive house prices?

In the UK, buying in some of the most expensive regions will cost you an arm and a leg. The South West is now the most expensive region, and experts have largely put this down to the second home market surging.

Across the UK, some of the most expensive regions include:

• South West: Average house price: £430,488
• East: Average house price: £385,420
• South East: Average house price: £441,246
• London: Average house price: £706,267
• West Midlands: Average house price: £264,017

These days there are actually locations in the UK that outdo London when it comes to house prices. Winchester, in particular, was found to be one of the most expensive places to live. There, the average property costs 14 times the average salary. Oxford is not far behind, with a price-to-earnings ratio of 12.4.

The following locations are the most expensive in the UK:

• Winchester: Average house price:£630,432
• St Albans: Average house price: £604,423
• London: Average house price: £564,695
• Oxford: Average house price: £486,928
• Cambridge: Average house price: £482,300

Tags: Economy, house prices, houses, savings

Stamp duty in the UK

by Madaline Dunn

Stamp duty has hit the headlines recently, following the end of Chancellor Rishi Sunak’s end-of-June stamp duty holiday deadline. Reports have highlighted that transactions have slumped after a surge of homebuyers taking advantage of the government’s housing market policies.

So what exactly is stamp duty, and what does the end of the stamp duty holiday mean for homebuyers and the housing market?

At The Salary Calculator, we’ll walk you through:

• What stamp duty is
• When stamp duty applies
• How much stamp duty costs
• When you must pay stamp duty
• What the stamp duty holiday was
• What the end of the stamp duty holiday means for the housing market

What is stamp duty?

Stamp duty, or Stamp Duty Land Tax (SDLT), refers to the tax you must pay to HM Revenue & Customs when purchasing a residential property or piece of land in England or Northern Ireland.

When does stamp duty apply?

Standard stamp duty applies to those purchasing a property valued at £125,000; that said, this does not apply to first time buyers unless their property is valued at over £300,000. Those who are purchasing a second property are also required to pay stamp duty, although the amount you pay here can be claimed back if you sell your first property within three years.

Exemptions apply where a portion of one’s home is transferred to a spouse or partner after a separation or divorce, or an individual inherited a property in a will.

How much is stamp duty?

The amount of stamp duty one pays is dependent on a property’s purchase price and is tiered in the same way as income tax. This is as follows for the period between 1 July 2021 – 30 September 2021:

For England and Northern Ireland:

• The stamp duty rate for a main residence property valued at between £180,001 – £250,000 is 0%. For those with additional properties, a 3% surcharge is applied to the entire purchase price of the property
• The stamp duty rate for a main residence property valued at between  £250,001 – £925,000 is 5% and rises to 8% for additional properties
• The stamp duty rate for a main residence property valued at between £925,001 – £1,500,000 is 10% and rises to 13% for additional properties
•  The stamp duty rate for a main residence property valued at over £1,500,001 is 12% rising to 15% for additional properties

For Wales from 1 July:

• The stamp duty rate for a main residence property valued at between £180,001 – £250,000 is 3.5% and rises to 7.5% for additional properties
• The stamp duty rate for a main residence property valued at between £250,001 – £400,000 is 5% and rises to 9% for additional properties
• The stamp duty rate for a main residence property valued at between £400,001 – £750,000 is 7.5% and rises to 11.5% for additional properties
• The stamp duty rate for a main residence property valued at between £750,001 – £1,500,000 is 10% and rises to 14% for additional properties
• The stamp duty rate for a main residence property above £1,500,000 is 12% and rises to 16% for additional properties

For Scotland from 1 April:

• Land and buildings transaction tax rate for a main residence property valued at up to £145,000 is 0% and rises to 4% for additional properties
• Land and buildings transaction tax rate for a main residence property valued at between £145,001 – £250,000 is 2% and rises to 6% for additional properties
• Land and buildings transaction tax rate for a main residence property valued at between £250,001 – £325,000 is 5% and rises to 9% for additional properties
• Land and buildings transaction tax rate for a main residence property valued at between £325,001 – £750,000 is 10% and rises to 14% for additional properties
• Land and buildings transaction tax rate for a main residence property valued at over £750,001 is 12% and rises to 16% for additional properties

When must you pay stamp duty?

When buying a property in the UK, it’s a legal requirement to pay your stamp duty within 14 days of the date of completion/date of entry. After this timeframe, interest may be applied, and you may be hit with a fine. This follows legislative changes introduced in 2019.

What was the stamp duty holiday?

The stamp duty holiday was introduced back in July 2020. This tax cut was introduced to stimulate the property market amidst the Covid-19 pandemic and make it more accessible to homebuyers. It resulted in savings of up to £15,000 for around 1.3 million homebuyers.

Although the stamp duty holiday was set to expire in March, it was extended until June 2021. Temporary stamp duty rates are now higher than before and apply between July to September. Standard stamp duty rates will apply from 1 October 2021 onwards.

Standard rates for England and Northern Ireland are as follows:

• The stamp duty rate for a main residence property valued at up to £125,000 is 0% and 3% for additional properties
• The stamp duty rate for a main residence property valued at between £125,0001 – £250,000 is 2% and rises to 5% for additional properties
• The stamp duty rate for a main residence property valued at between £250,001 – £925,000 is 5% and rises to 8% for additional properties
• The stamp duty rate for main residence property valued at between £925,001 – £1,500,000 is 10% and rises to 13% or additional properties
• The stamp duty rate for main residence property valued at £1,500,001 and over is 12% and rise to 15% for additional properties

What does the end of the stamp duty holiday mean for the housing market?

The end of the stamp duty has been predicted to have some negative effects, such as:

• Buyers pulling out of deals
• A decline in buyer interest, and;
• A drop in house prices

That said, the future is uncertain, and industry experts’ forecasts are varied. Recently, Nationwide recorded a “surprising” 2.1% rise in sold prices, which Robert Gardner, Nationwide’s chief economist, has attributed to a demand for properties between £125,000 and £250,000.

Meanwhile, Gabriella Dickens, a senior UK economist at Pantheon Macroeconomics, commented: “We think that house prices will pick up again in 2022, finishing the year about 4% higher than at the end of 2021.”

Tags: coronavirus, Economy, house prices, houses, income tax, recovery, SDLT, stamp duty, The Salary Calculator

Plans for re-starting the economy

by Admin

It has been a turbulent few months for many of us, with jobs being cut, furloughing schemes, working from home and closure of many businesses (small and large). Last week, Chancellor Rishi Sunak announced a number of measures which are designed to help us along the road to recovery. It is going to take several months (or even longer) and things may never quite be the same – but here are a few of the measures which have been announced:

A cut in VAT on hospitality – restaurants and hotels will see the VAT on their goods reduced from 20% to 5%. For consumers, it is possible that this will mean lower prices but businesses are under no obligation to pass this saving on. They may keep their prices the same and use the VAT saving to try to repair some of the damage caused by their enforced closure over the last few months, or to try to allow for fewer customers as social distancing regulations mean that they can’t seat as many people as before.

A temporary removal of stamp duty on house purchases under £500,000 – if you were planning to move house before March 2021, this may well save you a significant amount of money. Previously, any house sold for more than £125,000 attracted stamp duty (often thousands or tens of thousands of pounds) which the buyer had to pay on top of the purchase price. Until March of next year, the threshold has been increased to £500,000, in an attempt to encourage people to buy and re-energise the housing market.

A bonus paid to employers who retain furloughed employees – if an employer keeps an employee who was furloughed on the payroll until the end of January 2021, they will be eligible for a one-off £1000 bonus. This is to encourage employers to keep people on and prevent unemployment, even if business doesn’t pick up immediately now that lockdown has been loosened.

There were several schemes announced which are intended to encourage employers to employ 16-24 year olds.

A full run-down of the measures announced is available from the BBC.

Tags: budget, coronavirus, covid-19, Economy, house prices, houses, Jobs, recession, recovery, VAT

Budget 2013

by Admin

In yesterday’s budget, the Chancellor George Osborne outlined his plans for the next couple of years. In terms of take home pay from April onwards, there were no real surprises – the personal allowance has been increased and the top “Additional rate” tax has been reduced from 50% to 45%. In an earlier blog post I have described how these changes have been applied to The Salary Calculator.

Those who are repaying their student loan could be saving as much as £50 next year, as the threshold for repayment has increased from £15,795 to £16,365 – so the deductions from their salary will be less from April. However, the flip side of this is that because less of the loan is being repaid, it will take longer for the loan to be paid off in full and therefore will cost more in the long term.

What I found most interesting about the Chancellor’s announcements yesterday was the extension of an existing scheme for people buying their first house (FirstBuy) to allow more people to take part. The new scheme is called Help to Buy, and will help people to buy a new-build home with a 5% deposit, even if they can’t get the rest of the 95% from a mortgage lender. The government will provide a loan (interest-free for 5 years) for up to 20% of the value of the house, leaving buyers to find only 75% from a mortgage lender. In return, the government will get a share of the equity in the house – so if the house price increases, the amount repayable when the house is sold will increase at the same rate. This scheme is available to first-time buyers and to people who are already on the housing ladder – it does not have to be your first house purchase – and the value of the house can be up to £600,000.

There is also a scheme to help people buy houses which are not new-built, where instead of providing some of the money, the government will guarantee some of the mortgage so that if the buyers default, the lender gets some of the money from the government. This is aimed at encouraging lenders to allow people with small (5%) deposits to borrow.

If it takes off, this scheme has the potential to help people who are currently struggling to buy a home because they don’t have a large enough deposit. It may also help to stimulate the house construction industry, and bolster a flagging property market. The treasury has provided an infographic with some details.

Tags: April 2013, budget, house prices, income tax, Mortgages, Pay As You Earn, personal allowance, student loans, tax rates, The Salary Calculator