We’ve witnessed the first hike in interest rates for a decade – there’s no better time to secure a fixed rate mortgage and buy now.
The lingering economic uncertainty around Brexit we experienced last year rumbles into 2018 and this continues to be a factor in the London property market.
KPMG Economics say the prospect of continued uncertainty around Brexit negotiations combined with rising interest rates, could lead to further falls in house prices, with the after-effects of changes to stamp duty also impeding growth.
However, according to property website Rightmove, sold prices in Bermondsey over the last year were 15% up on the previous year and 51% up on the 2014 level of £542,336.
Bermondsey, with an overall average price of £820,200, was more expensive than nearby Rotherhithe (£522,229), but was cheaper than Shad Thames (£1,568,547) and Borough (£945,313)
In 2017 the Bank of England raised the base rate to 0.5 per cent, up from its previous 0.25 per cent. Bank officials pressed ahead with the first increase in interest rates for a decade in an attempt to protect British households from inflation that has risen since the Brexit vote.
But fear not. It’s not all doom and gloom.
Rising interest rates won’t affect those buyers looking to secure a fixed rate mortgage.
Fixed rate mortgages typically last for two or three years, but can be for longer, such as five or even ten years.
The rise and fall of rates will not affect your mortgage payments during your fixed period. This will allow you to budget your outgoings with ease and should interest rates change, you’re safe from those hikes.
With variable rate mortgages, as the name suggests, the interest rate can change at any time. This leads to unpredictability.
Fixed rate deals can be higher than variable rate mortgages and if interest rates fall you won’t benefit from this. But the security and peace of mind that monthly payments remain the same can outweigh the cost in the long-term.
It’s wise to think about how long you want to fix for. Once you’re locked into a fixed mortgage and you decide to leave before the initial period ends, there’s usually an early repayment charge, which can add to your costs.
Do remember that a ‘fixed’ repayment is not guaranteed indefinitely, and you may need to shop around more often to keep your mortgage competitive. Keep abreast of what happens to your mortgage when your fixed term ends.
So you’ve secured your fixed-term mortgage, what are you waiting for?
According to Rightmove, first-time buyers continue to hold the upper hand in 2018.
Miles Shipside, Rightmove director and housing market analyst, says: “Economic and political uncertainty tend to weigh more heavily on the capital given the large number of residents involved either directly or indirectly, and given the substantial costs of moving up to the middle or higher echelons of the housing ladder, many buyers hang back unless presented with a bargain. We forecast that the lower and middle sectors of the market will continue to outperform the upper with typical first-time-buyer sector properties showing the most price resilience as buyers move quickly to secure the savings.”
If now’s the time to buy, where is the best place to relocate?
A recent CBRE report identifies Southwark as a borough set for huge growth in the next 10 years.
The borough continues to witness regeneration and areas including Southbank, Elephant and Castle and Canada Water are all undergoing significant transformations.
Elephant and Castle’s £3 billion regeneration project will include a new shopping centre, a new northern entrance hall at the Tube station and 979 homes, of which 342 will be affordable. Elephant and Castle is already becoming a destination, with the opening of food market Mercato Metropolitano and the relocation of Southwark Playhouse.
Southwark could also benefit from an extension to the Bakerloo line. If plans go ahead the line will be extended across the borough and will include two new stations along the Old Kent Road. The road itself is already identified as an Opportunity Area in the London plan, which spans 700 acres and will see the delivery of 20,000 new homes.
While experts predict prolonged uncertainty over a favourable Brexit deal this could mean that house price growth will level out in the next few years. However, now could be the perfect opportunity to tap into what Southwark has to offer ahead of a golden age of regeneration.
Are you looking for property in the SE1 area? If you’re looking to sell or buy property in Lambeth, London Bridge, Bermondsey, Southwark or Borough, contact local SE1 estate agents Williams Lynch.