Jeremy Morcumb from Mortgage Advice Bureau in Swindon looks back on 2015 and what we can expect to come in the industry in 2016.
2015 has certainly been a year of change. Ireland publicly voted to legalise same-sex marriage, Sepp Blatter finally announced his resignation from FIFA and Adele resurrected her singing career with ‘Hello’.
And this theme of change filtered into the financial world, too.
Changes were made to the way Stamp Duty was worked out, the Mortgage Credit Directive date was publicized and numerous schemes were introduced or announced, including Help to Buy ISAs, the Starter Homes scheme and Help to Buy: London.
When will interest rates rise?
The ever-present subject matter throughout 2015 was that of interest rates continuing to remain at the lowest they’ve ever been and economists and experts constantly debating over when they will eventually rise.
The general consensus was that the rise would take place at the turn of 2016, but this all changed when the Chinese stock markets tumbled and had a knock-on effect on the confidence of the world markets – aptly dubbed ‘Black Monday’.
So what will happen next year?
Add these contributing factors to the return of UK deflation in September and the unanimity around the expected date of the rate rise disappears, with many now predicting a rate rise as late as April 2017.
It should be noted though, that even if things changed again next year, increases will only be in slight increments and the Bank Rate is not expected to return to 3% until 2025.
Is there a new Stamp Duty Change for landlords?
If you’re a landlord, you would have heard about this by now. Simply put, a new additional 3% Stamp Duty charge will be applied on top of the normal rates on any properties that are bought to let or as second homes.
From April 2016, someone buying a £100,000, for example, as a second home or property to let will have to pay £3,000 more than they would have had to beforehand.
Landlords and first-time buyers have been stuck in something of a “civil war” in recent times, with landlords being blamed as part of the reason that first-time buyers are currently struggling to get onto the property ladder due to the sheer number of properties that landlords own.
The money made from this will be invested in Shared Ownership schemes around the country, with the government promising 135,000 Shared Ownership properties, reducing rent for tenants that are saving for deposits.
Speaking of help for first-time buyers, the Starter Homes scheme finally got underway this month. The funding granted at the beginning of December will help 27 sites across the country prepare for the first wave of the proposed 200,000 Starter Homes.
Starter Homes are new properties that will be built on designated development areas such as under-used commercial land or vacant sites and will be available at a 20% discount to first-time buyers. According to plans, the scheme will apply to homes worth up to £250,000 outside of the capital, or £450,000 within London.
Help to Buy ISA
Another huge boost for first-time buyers in 2015 was the introduction of the Help to Buy ISA.
The scheme has been set up to provide first-time buyers with a tax-free saving account to save up for a deposit, boosted by a government bonus.
First-time buyers can save a maximum of £1,200 for the first month, and £200 each month thereafter, with the government providing a 25 per cent bonus on interest and contributions once the product is closed.
This bonus is capped at £3,000, with the maximum a first-time buyer can save being £12,000.
The scheme can be used for a deposit for any property under £250,000 outside of London, or £450,000 within, and can be used with any mortgage; it is not limited to Help to Buy mortgages.
The Mortgage Credit Directive
As of March 2016, the Mortgage Credit Directive (MCD) will come into full effect and the main effect will be on those known as ‘accidental’ landlords (buyers who find themselves inadvertently stuck with a property). Known as consumer buy-to-let mortgages, these mortgages are currently unregulated by the FCA but this will change from March 21st.
2016 – The year of the first-time buyer?
Next year certainly looks like a year that is focused on helping those who have struggled to get onto the property ladder for so long. So long as this is matched with an increase in the number of properties being built and the continued addition of location-specific schemes such as Help to Buy: London, there is every chance that Generation Rent could become Generation Buy in 2016.
Jeremy Morcumb is from Mortgage Advice Bureau in Swindon – for further information call 01793 611400, email firstname.lastname@example.org or visit: www.mortgageadvicebureau.com/swindon.