The UK housing market has been experiencing a steady uphill climb as far as interest rates go. So, is it the right time to buy your dream home, or is it perhaps time to renovate your current home? The following information is meant to help you decide if it's the right time to consider these options.
Trends in Interest Rates
If statistics are anything to go by, the UK National House Price Statistics show that annual interest rates have changed approximately 9-11 per cent on average. Is this an alarming trend? Not really, considering the rest of the world is battling with steep rises in mortgage rates as well. The UK housing market, in general, seems to be having a tough time and so are its citizens. For many, the prospect of buying new home has been put on the back burner by the prospect of further increases in interest rates.
Home Improvement Trends
If interest rates for the UK housing market are on the rise, the common effect is that the sale of home improvement goods will be on the decline. In fact, in December of last year, there was a decline of almost 1.3% since the previous year. (Source: Moneyweek.com). So why is it that home improvement retailers are facing a tough time as far as sales go? There are many reasons for this and the most notable can be accounted to the first time home buyer.
Why the decrease in home improvements?
For the first time home buyer, the UK housing market has been far from generous. Steep climbs in interest rates have made monthly mortgage payments a virtual nightmare. This is one reason new home buyers find decorating their homes a daunting task. Most of the buyers borrow up to three times their current salaries. Due to this, most homeowners' only hope for recovering this amount is by rising interest rates in the future. The prospect of selling their home at a much higher price is what motivates these people to buy new homes in the first place. In such a situation, is home renovation really the first on one?s mind? Not really.
Apart from this, another disturbing trend seen in the UK housing market is that an average household consists of two income earners. Most likely the home depends on the incomes of both earners to pay off basic bills like mortgage, heating bills, council taxes, etc. The ideal situation would be if one person?s income was set aside for the luxuries of the home. With such a scenario, chances are, if even one person stops earning, it is sufficient to lead the house into repossession. Not surprising then that home improvement seems to be last on people?s mind in the UK.
Is the UK housing market headed for a crash?
There has been a lot of speculation on this topic. Some say the UK market is still quite stable and that increasing interest rates are not sufficient proof of an impending downfall. However, there are the pessimistic ones who forecast a very real danger of a crashing housing market. There are several reasons why this might happen, some of which include irresponsible lending on the part of first time buy-to-let landlords, stressed first time home buyers, and general speculation about the impending disaster ahead.
The Popular Buy to Let Option
Another trend being seen these days is the increasing popularity of the buy to let mortgages. A significant share of new home purchases are on account of the buy to let phenomenon. This is in spite of the fact that rates are expected to rise only by 2% at the end of the year. It is still unclear on what prospects the landlords are basing their prospective earnings. Returns are potentially seen only in the single-digit category, which is pretty miniscule, considering the average profits earned.