Christmas Eve brought the news that Boris Johnson had conclusively agreed on a Brexit deal for the UK with the European Union. This gave optimism that the economic turmoil of leaving the EU would be radically reduced, yet what will this ‘trade deal’ do to the value of your Warrington home and the mortgage payments you will have to make?
Since the summer, the Warrington property market has been booming, yet many commentators have cautioned that the momentum cannot last. With unemployment and the end of Stamp Duty Holiday on the 31st March, the Halifax reported last week that they believed UK house prices would drop by at least 2% (and in some areas 5%) in 2021.
I find it fascinating the Warrington property market has defied the doom and gloom swamping the wider British economy in the last seven months. The Warrington property market has profited from the large swell in demand from better-off existing Warrington households trying to buy larger Warrington houses (as they are required to work from home) together with the added benefit of saving money from the Stamp Duty Holiday.
Warrington house prices are 4% higher than a year ago, making our local authority area the 213th best performing (of the 396 local authorities) in the UK.
What will happen to Warrington house prices?
The Warrington property market in 2019 was held back because of the uncertainty of the Brexit deal. In January 2020, we saw the demand released in the fabled ‘Boris Bounce’, only for buyer and seller activity to fall off a cliff in March during the first lockdown. It then took off like a rocket once lockdown was lifted. UK house prices are 4.19% higher today, year on year (although some areas are breaking the mould, like Aberdeen whose house prices have dropped by 5.1% and at the other end of the scale, Worcester’s house prices have increased by 11.9% year on year). A lot of that growth in UK property prices has been fuelled by buyers spending their stamp duty savings on the purchase price of their new home. Yet, it cannot be ignored.
Of the 104,600 workers in Warrington, 7,100 are still on furlough (although roughly 40% of those people are still only on part-time furlough).
When the furlough scheme ends in April 2021, unemployment is likely to rise to in excess of 11%, whilst the protection for the homeowners utilising mortgage holidays will finish.
Piloting the rocky shoreline of the recession is more important than any Brexit deal for Warrington homeowners, buy-to-let landlords, buyers and sellers.
In April, the market will also be dealing with the end of the Stamp Duty Holiday, which is due to come to an abrupt halt on the 1st April 2021. Consequently, we will continue to see the house price index's show growth in the first half of 2021. They will then recede as the prices of Warrington homes purchased after the 1st April 2021 reflect the lower price paid (because buyers would have had to pay for their stamp duty again). Therefore, probably by the end of 2021, the Halifax may be correct, and Warrington house prices will be 2% to 5% lower than they are today, simply because of the stamp duty.
What will happen to mortgage rates?
The real benefit from the Brexit deal is that there will be no tariffs on most goods coming into the UK. 52% of all goods imported into the UK are from the EU (totalling £374bn per annum). The UK Government were planning to add between 2% and 10% tariffs under World Trade Organisation rules on the vast majority of those goods. Price increases because of those tariffs would have fuelled inflation, meaning the Bank of England would have to increase interest rates. Although 77.2% of British mortgages are on fixed rates (paying an average of 2.16%), eventually those increased Bank of England rates would have fed through into higher mortgage payments. To show you how vital low interest rates are…
The average Warrington homeowners’ mortgage is £333.17 pm, owing an average of £135,835.
Yet if interest rates rose only 1.5%, Warrington homeowners’ monthly mortgage payments would rise to £502.97 pm, and if interest rates were at their 50-year average, then the mortgages payments would be an eye-watering £979.52 pm (note all mortgage payment figures mentioned above are only for the interest element of the mortgage- the capital repayment element would be additional and variable depending on the length of mortgage).
As I have mentioned many times in the articles I have written about the Warrington property market, low-interest rates are vital to ensure we don't have a property market crash. That's not to say just because they are at an all-time low of 0.1% to aid the economy that there won’t be some form of realignment of property prices later in the year (as mentioned above). Yet low interest rates mean people can still pay their mortgages, so there won't be panic selling. That would mean there won't be a flood of property come to the market (like there was in the 1988 and 2008 property crashes when interest rates were much higher), suggesting property prices should remain a lot more stable.
To conclude, these are just my personal opinions. If you are a Warrington landlord looking for advice and an opinion on what to buy to maximise your returns, please don’t hesitate to contact me. If you are a Warrington homeowner, looking to buy or sell and need any advice or opinion on where the market is and where your Warrington home sits in the bigger Warrington property market picture – again feel free to drop me a line.
If you are looking for an agent that is well established, professional and communicative, whether you’re buying, selling or looking for an investment opportunity, then contact us to find out how we can get the best out of the Warrington property market.
Email me on manoj@hamletwarrington.co.uk or call on 01925 235 338 – we are based on the Warrington Business Park, Long Lane, WA2 8TX. There is plenty of free parking and the kettle is always on.
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