Housing market data for the close of 2020 and early 2021 are expected to show very little difference between the two. There is expected that what decline resulted from mortgage applications, remortgages made up for. Remortgages are being sought by homeowners trying to beat a standard base interest rate increase. Warnings of an increase in the rate have been appearing more often as inflation increases. In the January meeting of the Monetary Policy Committee, the rate was left untouched making the rate only a few months to have been set for a two year period. Economists don’t expect it to go far beyond that two-year period if it indeed does.
Housing starts are expected to report a decline due to a lack of buyers affecting the faltering housing demand, declining house prices and extremely cold winter weather that hit at the end of 2020. The monthly jobs report for December showed that the construction sector continued losing jobs. This means that new residential construction projects probably failed to take off at the end of the year as was hoped.
UK house prices rose 0.4% year-on-year in December, the same rate of increase as in November, data from the Nationwide Building Society showed. Halifax has released an expected forecast that UK house prices will be similar in 2021 to the same pattern as 2020 and will finish the year at a level similar to now. However, the Royal Institute of Chartered Surveyors (RICS) is more pessimistic in their forecast and is predicting that UK property values will be as much as 2% lower by the end of 2021. If unemployment rises strongly, RICS says a decline of up to 5% in housing prices is possible for 2021.
Along with the other known factors hitting the current struggling housing market, there is a possible new one about to hit it. This one could hit it hard and bring a complete halt to a long and struggling recovery. The FSA is considering a revision of current lending policies as it conducts its mortgage review. Tougher rules and regulations could harm the fragile market as it now stands and yet that is exactly what is expected from the FSA. Housing minister Grant Shapps is due to meet with the FSA to get an update on the progress of their review and he is set to put pressure on them not to implement tougher rules at all or at least until there is more recovery. The expected new rules will force lenders to carry out tougher affordability checks on possible borrowers in an attempt to only give loans to those that can afford them and any change in interest rates in the future. Overall it should result in fewer borrowers defaulting.
The worry is that the tougher rules would further hinder the housing market recovery by shutting out even more possible buyers. The current policies in place have cut many new first-time buyers from achieving property ownership. Without new buyers climbing onto the property ladder there are too few to help push others up the ladder so that they can upgrade. The entire cycle of buyers to properties then fails to grow and without a growth in the housing market, the overall economic recovery will fail to jump-start for some time.