Getting on the property ladder can be hugely challenging. When you’ve made it, however, it can be hugely rewarding. If nothing else, you're building up equity in an asset rather than handing over rent. If you’re thinking of buying your first home in 2023, here are some tips to help. Maximise your deposit There’s still time to open a Lifetime ISA (LISA). You can put up to £4K PA in it and get a 25% bonus at the end of the (financial) year. If you only have a Lifetime ISA for one year, this will only be £1K. It is, however, £1K of free money. If you’re looking to buy a home in 2024 or beyond, then you should certainly look at a (LISA). If you can save more than £4K PA, then you will need somewhere else to put your money. A regular Cash ISA is likely to be your best option. If it’s your only ISA, (for that year), you can save up to £20K PA in it. You don’t get a bonus but you do get your interest sheltered from tax. If you’ve been investing to build up funds, then you’ll need a plan for converting your shares into cash. It may be advisable to get help from a financial advisor. Work on your credit records Ask your landlord if they will report your rent payments to the credit bureaux. If they won’t, then consider signing up for a rent-reporting service. At the very least, keep a close eye on your credit records. If you see any unexpected events, follow up on them promptly. Mistakes do happen. If they happen to you, you need them corrected before you apply for a mortgage. Check whether you qualify for assistance to buy The two Help-To-Buy schemes (Equity Loan and Mortgage Guarantee) are not the only forms of assistance for first-time buyers. There is also the First Homes Scheme. The main qualification criteria for this scheme are set by the government. Local authorities can, however, fine-tune these criteria. You, therefore, need to check the details for your local area. Shared ownership can also be a way to get on the property ladder at a relatively low cost. Many shared-ownership schemes have a path to buying the property outright. Again, check the details of the scheme(s) in your local area. Find a mortgage broker A mortgage broker will be able to assess your finances and advise how much you can really afford to spend on a property. They will also know where you are most likely to get the most suitable deal It’s impossible to overstate the importance of getting the best possible deal on your mortgage. Remember, mortgages may have relatively low interest rates (compared to other credit products). They are, however, for very large amounts. This means that getting anything less than the most suitable deal can get very expensive very quickly. Get pre-approved for a mortgage Ideally, you should be pre-approved for a mortgage before you even start looking for a place to buy. There can, however, be a bit of leeway here, especially in a slow-moving market. If you do happen to see a property that’s a good fit for you, you can try approaching the seller. As long as they are convinced that you are a serious buyer, they may let you view the property. Being able to tell them that you have at least started the mortgage pre-approval process may do a lot to get them to take you seriously. Line up a conveyancer Good conveyancers are always in demand, even when the housing market is relatively slow. Do your best to find a reputable conveyancer in your area before you start your home search. This can make the process towards completion both much quicker and much easier. For mortgage advice, please get in touch We do not advise on investment products, and we act as introducers for it

In the UK, demand for rental accommodation tends to be consistently strong. If you have a spare room, you might want to tap into this demand. What’s more, you can earn up to £7500 a year tax-free under the government’s rent-a-room scheme. If this sounds good, here’s a simple guide on how to turn your spare bedroom into extra cash. Decide what you want from a tenant Probably the first question you need to answer is what sort of lease you’re willing to offer. To do this, think about these key questions. Do you want a full-time tenant or somebody who’s only there on weekdays? Do you want a long-term tenant or a short-term tenant? Do you want to let the room to a single person or a couple or are you open to either? Then think about your lifestyle and what that means for house rules. In particular, you will need to set a position on the following: Smoking/vaping Pets Noise levels Working from home Visitors particularly overnight visitors and/or children Lastly, think about how much you’re going to need to get on with your tenant personally. In other words, how much interaction are you going to have with them? If your paths are likely to cross fairly often, what sort of person will you be compatible with? Be clear on what you can offer The laws of supply and demand apply both ways. In other words, the more you can offer, the more interest you’re likely to get. The more interest you get, the more scope you have to charge a relatively high level of rent and/or be selective about your tenants. Prospective tenants need to know what they can expect: In the local area In the house and room From you personally Think about points such as: The local amenities Transport/parking Overall accessibility (especially for people with mobility issues) The facilities in the house (especially the internet and the number of bathrooms) The size and condition of the room itself (and whether it has its own bathroom). For completeness, if you want to participate in the rent-a-room scheme, the room will need to be furnished. Think about any aspects of your lifestyle that a prospective tenant might want to know about. In particular, do any of the following apply to you? Smoke/vape Have children Have pets Have a lot of visitors WFH/keep odd hours Prospective tenants will also need to know what terms you want to set. In particular, you will need to cover the following points. The rent and payment frequency (e.g. weekly/monthly) The deposit The contract length and any break period The arrangement for bills/CT For completeness, if you are using the rent-a-room scheme, the £7500 cap is for rent only. It is permissible to charge council tax and bills separately. Create a listing that's honest but sells A listing should highlight everything you can offer. At the same time, be careful to avoid creating a misleading impression of what the tenant can expect. All that will happen is that you get interest from people who will end up disappointed. Select your tenant When you are letting out a room in your home, there are generally two parts to tenant selection. Firstly, you find somebody you believe you can get on with (insofar as that’s necessary). Secondly, you undertake practical checks. For example, you may want to take references and/or do a credit check. If you are feeling particularly cautious, you may want to do a criminal records check. Keep in mind that a prospective tenant may want to undertake due diligence on you. You will need to decide for yourself how much information you are prepared to disclose. Set up a lease It’s easy enough to find lease templates to buy or even download for free. It can, however, be worthwhile paying a lawyer to draw one up for you. For more advice please get in touch

Houses are major purchases. That means both sellers and buyers are highly motivated to get the best value they can in any transaction. With that in mind, here are some tips for sellers looking to get the best price when selling a house. Be realistic about what the best price is The best price for your house will depend partly on the overall state of the market. It will also depend partly on your position as a seller. In other words, how long can you afford to wait for a buyer who will pay top price? The quicker you want to sell, the more pragmatic it can be to drop your asking price. You can, however, still work to make your home as attractive as possible to buyers. This will maximise your chances of achieving the asking price (or even higher). Be prepared No buyer wants to start the process of buying a home only to have the seller pull out of the sale. Do everything you can to reassure them that you are serious about moving. In particular, try to collate all the documents that will be required for the conveyancing process. Most buyers will very much appreciate sellers that actively help to make this go smoothly. Understand what upgrades can add value to your home In general, you want to avoid making any major changes to your home in the run-up to selling it. Firstly, a feature that appeals to you may not appeal to buyers. Secondly, even if it does, it may not appeal to them enough for you to recoup your money on it. Thirdly, if the work takes longer than expected, it may negatively impact the sales process. By contrast, it can be very worthwhile looking at any upgrades that could potentially expand the usable area of your home. Then look at the best way to leverage this. For example, lack of parking is a common issue. Can you secure some kind of parking space that you can transfer? If you can expand your home, could you secure the necessary planning permission before you put your home on the market? If your home could be better reconfigured internally, could you provide plans for this? These kinds of steps can help you to monetise the potential of your home without a high upfront investment. Deal with any outstanding repairs and maintenance Most buyers just want to move in and get settled. They may be happy to do their own decorating. They do not, however, want to deal with repairs and maintenance. Some buyers may even see outstanding repairs and maintenance as a red flag. Deal with them before you put your home on the market. Declutter and deep clean Clutter is a distraction for everyone. When you’re selling a home, it’s a distraction that can cost you money. You’re probably going to want to declutter before you move anyway, so why not start the process early? If you need time to go through your belongings, try looking for a storage facility you can access easily. Move everything but essentials into it and then declutter from there. Make sure you can put everything else into some form of closed storage. Baskets with lids can be invaluable here. They’re particularly good as hiding places for children’s toys. Once you’ve decluttered, give your home a top-to-bottom, wall-to-wall deep clean inside and outside. If you have a garden, put this in its absolute best condition too. You may be amazed at what a difference it makes to the desirability of your house. Banish smells before viewings Ignore the oft-repeated sales advice of scenting your home before buyers arrive. You have no idea how a buyer is going to react to a particular smell. In particular, avoid having fresh flowers at home. They may trigger allergies. If you have pets, make sure that your home is entirely free of pet odours. It’s best to remove the pets themselves as well. For mortgage advice please get in touch

For many people, the cost of living is biting hard. This means that they literally cannot afford any nasty surprises. Having the right insurance cover is a key source of protection against this. With that in mind, here are some tips on how to get the right cover at the right price and maximise your chances of having any claim accepted. Work out what you need to cover If you have a car, then you need third-party insurance. It can be worth getting fully-comprehensive. The price difference between this and third-party only can be smaller than you’d think. After this, your priorities are usually your life, your house, your health and medical bills and legal bills. Your life and your house are fairly obvious. They may not apply to everyone. For example, life insurance only applies to people with dependents. With that said, dependents can be more than just children. It could mean broader family, friends or even pets. Likewise, health and medical bills can relate to pets as well as people. They can also relate to making sure you have an income if you become unable to work through accident or illness. For example, you may want or need Payment Protection Insurance, Income Protection Insurance and/or Critical Illness Cover. Having insurance for legal bills can help to protect you from having to settle unreasonable claims against you because you cannot afford to fight them. This may seem excessive but it is an issue even at the best of times. Right now, many people are likely to have a particular incentive to be aggressively litigious. Again pet owners should be particularly cautious here as should cyclists. You should also look to cover anything essential to your everyday life, health and/or wellbeing. For example, if you rely on your bicycle to get to work, then you probably ought to insure it. Work out who you need to cover It can be worth covering non-income-earners (e.g. home-makers) and even children as well as income-earning adults. Non-income-earners are generally contributing to the home in some other way. For example, they often have caring responsibilities. This means that, effectively, they cushion the family from potentially crippling expenses (e.g. childcare). If they become unable to carry out their usual tasks, then somebody else will need to step in. Family and friends may be able to help out for a short period but probably not for a long one. Realistically, however, even for short periods, it can be reassuring to know you can afford professional help. Children may not contribute financially to the family. Again, however, if they become ill, it can become expensive for their family. For example, parents may need to take time off work and incur extra expenses such as hospital parking. This means that having at least some level of insurance cover can be a wise precaution. Getting the right deal for your insurance Getting the right deal for your insurance and maximising your chances of a claim being accepted are really two sides of the same coin. In simple terms, the less risk you appear to be, the less you will be charged for insurance cover. Insurance risk is determined by two factors. These are your level of cover and the likelihood of you making a claim. This means that the first step in getting a suitable deal for your insurance is realistically assessing the level of cover you need. For example, if you only need life insurance to pay off a mortgage, then you can reduce it as the amount you owe goes down. Similarly, if you have home buildings cover then you need to cover the rebuilding cost of your home, not its market value. Your second step is to take all reasonable precautions to reduce the likelihood of you needing to make a claim. For example, if you’re a smoker, giving up can significantly reduce premiums for certain types of insurance. Ideally, you should have active proof of any statements you make when you apply for insurance or if you make a claim. You should therefore keep any documents (or photos or videos) that could possibly be relevant. You don’t, however, need to keep them on paper. Electronic records are usually perfectly acceptable. For more information, please get in touch For building and contents insurance & payment protection insurance we act as introducers only

Money cannot buy you love, but disagreements about money can strain even the most loving of relationships. The reality is that if a relationship is to have a long-term future, couples must be prepared to reach agreements about managing their finances and both parties need to be happy with, and willing to stick to, these agreements. Here are 5 steps to making that happen. Take stock of where you are now Regardless of whether you are just officially becoming a couple or whether you have been together for some time but never (properly) addressed the issue of managing money, you need to have a starting point for your financial journey. So, where are you both now? Singly and jointly lay out your income, expenses, debts and assets. Check that your sums add up, in other words if you get to the end of the month without actually knowing where your salary has gone, it's time to start tracking it. Decide where you both want to be going into the future Think about where you want to be in one, five and ten years from now. What is important to you both and what is important to each of you individually? Map out a plan for your future together and work out how much your ideal life is going to cost. Start to build a map which links your current situation to your future dreams Realistically speaking, you may not be able to achieve your plans in your initial “ideal” time-frame. That is fine, it will give you a starting point and get you thinking about short-, medium- and long-term goals and realistic time-frames in which to achieve them. Financial planning is largely a balancing act between addressing current needs and wants and preparing for the future so take some time to think about what is really important to you in the here and now and what you are prepared to give up now so as to be better prepared for the future. Decide on whether or not you are going to have a joint account Joint accounts can be very convenient in terms of managing household expenses. Both parties can pay into them and shared bills can be paid out of them. This means that, in principle, either or both halves of the couple can manage household expenses. The challenge with joint accounts is that the account holders can have very different views on what constitutes reasonable expenses and withdrawals. One way to address this issue is to keep a joint account for household and other clearly-joint expenses and for each individual to have their own bank account into which they pay themselves and allowance to do with as they please. This can also provide a safety net in case of any issues with the joint account, e.g. banking outages. Make the effort to understand each other's point of view If one half of a partnership is a habitual saver and the other is an easy-come-easy-go spender, conflicts can arise out of frustration with these different habits. Instead of getting angry or upset, talk to each other and make the effort to understand why it is important to for the saver to save and for the spender to enjoy living in the moment. Then work to find a way to accommodate both your needs. For example, if the spender has a stressful job and likes to have some fun at the weekend, maybe they could start taking their own coffee to work instead of stopping off at a coffee shop and using the money they save to finance going out at the weekend.

Sometimes getting any mortgage deal can be a challenge. When, however, you do have a choice between different options, it’s vital that you choose the right one. Mortgages can be for such large amounts that even a small mistake can make a big difference to your finances. With that in mind, here is what you need to know. There are five main factors you need to consider Once you know these, you can do the sums to work out which deal is best overall for your finances and lifestyle. The five main factors you need to consider are: The type of mortgage you need/want Any features you need/want The interest rate and term The set-up fee Early repayment penalties The type of mortgage you need/want In some instances, this will be determined by the type of purchase you want to make and/or the type of buyer you are. For example, if you want to buy a property to let out, then you will need a buy-to-let mortgage. Assuming you want to buy a residential property, then your first choice is whether to go repayment or interest-only. Keep in mind that if you want an interest-only mortgage, you will need a realistic plan in place to pay off the loan at the end of the term. If you go for a repayment mortgage, then you need to choose between variable-rate or fixed-rate. In principle, the cost of variable-rate mortgages can go up infinitely. Fixed-rate mortgages, by contrast, are guaranteed to cost the same for the length of the term. They may not, however, necessarily work out more affordable overall. Any features you need/want Would you like an offset mortgage where you sacrifice interest on your savings so that you pay less interest on your loan? Would you like the ability to take payment holidays, make overpayments or make withdrawals of money you’ve already paid? Would you like cashback? Make a “shopping list” of features you need and want. Be very clear about which options are needs and which options are wants. Remember, any special features can add to the price of your mortgage. You, therefore, need to decide which ones are really worth the money. The interest rate and term You need to know both the interest rate and the term to compare mortgages fairly. The main reason for this is that the term will determine how long it will be before you need to remortgage (or go on your lender’s standard variable rate). For example, if you take out five mortgages each with a one year term, you will have to pay five sets of fees. If, however, you take out one mortgage with a five-year term, then you will only need to pay one set of fees. That does not necessarily mean that the five-year fix will work out more affordable. You need to do your sums carefully. The set-up fees Some fees are likely to be the same regardless of what lender you use, for example, surveyor’s fees. You should, however, check if the lender charges any fees and factor them into your calculations. What’s more, you need to account for them accurately. Remember, if you incorporate the fee into the mortgage amount, then you will be paying interest on it over the lifetime of the mortgage. This can work out significantly more expensive than just paying it upfront. Early-repayment penalties These might not be deal-breakers but it’s advisable to know them anyway. Life can happen, for better as well as for worse. It’s therefore a good idea to know how much it would cost you to terminate your mortgage early.

It’s common knowledge that first-time buyers are getting older. There are lots of reasons for this. Many of them relate to the fact that people are living longer. Some, however, relate to the difficulties of getting on the property ladder. In particular, first-time buyers often struggle to put together a deposit. The good news is that strategy can help a lot here. The importance of attitude Some of the challenges related to saving are definitely practical. Although first-time buyers are getting older, they are still likely to be relatively young adults. This has two key implications. Firstly they will be at the lower end of their earnings potential. Secondly, they will probably want to make the most of their pre-child years. Both of these points can make it difficult for young adults to focus on saving for anything let alone a deposit. In fact, saving for a deposit can seem like an impossible goal. Young adults may put money into a “deposit fund”. They may, however, find it hard to commit enough to make progress in the sort of timescales they would like. This can set up a bit of a vicious cycle. Young adults don’t make saving for a deposit one of their top priorities. As a result, they don’t make encouraging progress so they lose their motivation to save. They may also be disheartened by seeing how house prices keep increasing faster than their savings. If young adults can be persuaded to prioritise saving for a deposit astutely, they can make a lot of progress with minimal effort and sacrifice. This can help to motivate them to keep going. Family and friends can help a lot here, not necessarily financially, but by giving younger adults the emotional support and encouragement to keep going. Small savings really do add up Probably the key lesson most young adults need to learn is that pennies really do turn into pounds. What’s more, they’ll turn into pounds even faster if you give them a helping hand. This doesn’t have to mean cutting out everything you enjoy. It doesn’t even have to mean significantly cutting back on everything you enjoy. It simply means using your income mindfully. Be very careful with credit Credit is a bit of a double-edged sword, especially for young adults. On the one hand, you need it to build up that all-important credit rating. On the other hand, it can work out very expensive. Access to credit can also tempt you into making purchases you wouldn’t otherwise have bought. This includes impulse purchases and convenience purchases, both of which can severely damage your finances. Get the best deal on everything Do your research before every purchase, including regular ones like food and cleaning products. The first question you need to answer is “Do I really need or want this?”. Even if the answer seems obvious, ask the question anyway. You might surprise yourself. For example, you might be spending your money filling up your trolley on (partly) ready-made foods. With a bit of organisation, however, you could probably make your own instead. That could save you a lot of money. Learn (or relearn) household skills There are definitely times to call in the pros and pay for their skills. There are, however, also times when you can save a lot of money just doing it yourself. Anyone can learn basic cooking, sewing, household management and household maintenance skills. Again, these can save you a lot of money with very little effort. Put your savings to work If you’re a first-time buyer, then probably the most obvious place to keep your deposit is a Lifetime ISA. The advantage of this is, clearly, the fact that the government contributes to your savings. Be aware, however, that there is a penalty for withdrawing savings for any purpose other than buying your first home or funding your retirement. It’s therefore highly advisable to have an emergency fund and/or insurance you can access if necessary. If you can’t do this, or just don’t fancy the Lifetime ISA, then you might want to look into other options such as regular ISAs. These don’t have the bonus you get with the Lifetime ISA but could offer much more flexibility. For investments, we act as introducers only

The end of a calendar year is often a time to reflect on the old year and make plans for the new. It has particular relevance in finance because the start of a new calendar year means the end of a financial year. This can have major implications for tax and hence financial planning in general. With that in mind, now seems like a good time to reflect on buy-to-let as an investment class. Why buy-to-let became popular At a high level, buy-to-let is arguably the safest form of investment there is. People always need somewhere to live. Not everybody can own a house and, even if they can, they may not want to. For example, younger people may prefer the flexibility of renting. Older people may want to divest themselves of property to minimise their estate’s inheritance tax liability. This means that it’s probably safe to assume that there is always going to be some level of demand for rental property. Buy-to-let can also be one of the easiest forms of investment to manage. In fact, investors don’t really have to manage it at all in any practical sense. They can hire a letting agent to take care of the practicalities for them. They can also hire an accountant to deal with the financial aspects of running a buy-to-let property. The potential pitfalls of buy-to-let Investing in buy-to-let, by definition, involves buying property. The cost of property means that investors need to be prepared to commit significant capital before they see any income. In fact, investors may even need to use financing (mortgages) to buy property. If investors miscalculate the returns a property could make, they could find themselves having to swallow a painful loss. If they only hold the property for a short time, it may not appreciate enough in value to cover the transaction costs of buying and selling it. Investors may also find themselves having to deal with problematic tenants. Letting agents will do their best to resolve issues without the involvement of the landlord. At the end of the day, however, if the situation gets really bad, the landlord will have to decide whether or not to pursue legal action. The alternatives to buy-to-let Currently, there are two main alternatives to buy-to-let. These are commercial property, and short-term lets. Here is a quick guide to how they compare to residential buy-to-let. Commercial property The main commercial property market tends to work similarly to the bond market. Investors buy a stake in a commercial property. In return for this stake, they get a guaranteed income for a guaranteed time. At the end of this time, the investor either sells the stake back to the management company or renews it. The advantage of this approach is that the investor gets a guaranteed income (assuming the management company remains in business). The disadvantage is that investors generally do not benefit from any increase in property prices. Short-term lets Short-term lets are classed as commercial property. They are, however, usually discussed separately since they tend to operate differently. The main reason for this is that investors typically buy a whole property rather than just a share of one. This means investors can benefit from increases in property prices. The main advantage of short-term lets is that they have the potential for significant returns. The main disadvantage of short-term lets is that they generally require a lot more work than residential property. Investors should also be aware that the government and/or local authorities may start clamping down hard on short-term lets. They could essentially force investors to move into regular buy-to-let or sell their properties. YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE The FCA does not regulate commercial mortgages and we act as introducers for it

Young adults move out of the parental home for a variety of reasons. Often these are to do with study or work. For example, students may want to be near their university. Apprentices may want to be nearer their work. Young adults can be an interesting demographic for landlords. Here are some tips on entering that market. Choose the specific demographics you are interested in At a high level, young adults tend to be categorised as either students or workers. You could, however, potentially niche down further than this. In fact, it might be a good idea to do so if you’re thinking about buying property in an area where there’s a lot of competition. For example, some young adults are single, while others are in couples. Both need accommodation. They may prefer to be on their own or they may prefer to share with friends. They may be open to either option or to sharing an HMO with other people. Some young adults will have service dogs and/or need accessible accommodation. Some will be working and studying. Of these, some will be working and studying from home and others will be going on-site. Others will be doing a combination of both. Each group may have broadly similar needs and wants but there will be differences between them. There are also likely to be differences between their budgets. Pick a location that suits your demographic If you want to focus on students, then you’ll need to have property in a student town. If you're interested in young adult workers, then you’ll need to look for locations that attract them. If you want to keep your options open, then you’ll need to look for student towns that also attract young adult workers. Research the location carefully Once you’ve picked a location, research it thoroughly. Find out everything you can about its property market and the young adults who live in it. In particular, try to answer the following questions. What type of property is in demand in this area? Who, specifically, is interested in it? What type of income do they have? What level of rent could they afford? What are they looking for in a property? You could also research local lettings agencies. At the very least, try to get an idea of the going rate in the area. Decide what type of property interests you If you are interested in letting to students, then you might be interested in purpose-built student accommodation. This is classed as commercial property. It, therefore, operates along different rules from standard buy to let. If, however, you want to stick with standard, residential buy-to-let, then your main choices are houses in single occupation and houses in multiple occupation (HMOs). Both types of property are subject to the standard regulations, laws and bylaws relating to residential lettings. Additionally, HMOs are subject to special licensing requirements. These can vary from one local authority to another. It’s therefore vital to check the rules in place in your local area. Failure to register a property correctly may result in a penalty even if your property is fully compliant with all other rules. Assess properties with your target market in mind Whenever you look at a property, do your best to assess it through the eyes of your target market. Start by looking at the property’s core features. Think about whether they are likely to attract or repel your target demographic. For example, if a property is very energy efficient, you can market it as having low running costs. This could be a major selling point for young adults on a tight budget. Then think about any updates you would need or want to make to attract your target market. This would usually include furnishing it so remember to account for the cost of this. Also, remember to account for the fact that furniture will not last forever. At some point, it will need to be updated. Please get in touch if you wish to discuss mortgages. Your property may be repossessed if you do not keep up repayments on your mortgage.

House price rises don’t have to be followed by falls. In fact, they don’t necessarily have to be interspersed with plateaux. They cannot, however, simply keep storming ahead in defiance of both logic and affordability criteria. This means the UK housing market is arguably long overdue for a cooling-off period. This raises the question of whether it will come in the form of a plateau or price drops. It also raises the question of whether a contraction would be painful or would actually be a benefit overall. Why the UK housing market is due for a cooling-off period When COVID-19 hit the UK, Rishi Sunak, then chancellor, ordered an SDLT (Stamp Duty) holiday. This was originally due to run between the 8th of July 2020 and the 31st of March 2021. It was, however, ultimately extended to the 30th of September 2021 (albeit with a reduction in the discount). This tax break was great news for onward movers and investors. Unfortunately, it meant that the existing SDLT discount for first-time buyers essentially became meaningless. The end of the SDLT holiday saw first-time buyers regain their advantage over onward movers and investors. It also saw the economy get back into gear after COVID-19. Both of these changes helped give fresh strength to the housing market. Realistically, however, neither could be expected to last forever. Firstly, there is a limit on the number of people who need or want to buy or sell (or both) at any point in time. Secondly, the UK is now recognised as being in a cost-of-living crisis. This means that, overall, even people who might want to buy are likely to find it more challenging to do so. Furthermore, lenders are likely to be well aware of this. They will hence take this into account when making lending decisions. Will the cool-off take the form of a plateau or price drops? Currently, this is very hard to assess. Realistically, much is likely to depend on how the economy performs over the next few years. Part of this will depend on actions taken by people in the UK, particularly the government. Part of it, however, will almost certainly depend on global factors. This will include how well the rest of the world recovers after COVID. If the UK’s economy performs at least reasonably well, then there is a good chance the housing market will simply stand its ground until inflation does its work. As long as sellers can afford to pay their mortgages, they will only be forced to move if their personal circumstances change. This could result in a standoff between sellers and buyers with the former mostly holding out for buyers able and willing to meet their price. The exception would be sellers who are forced to move and who therefore are under more pressure to be flexible on price. On the other hand, if the economy does not do well, sellers may be forced to sell. They might also be forced to price their home as attractively as they can to sell it quickly. Even if they’re not, they might be prepared to be flexible in return for a serious offer from a serious buyer. These distressed (or semi-distressed) sales would act to lower overall sales prices. They might therefore put other sellers (and estate agents) under pressure to lower their prices. Would house price drops be entirely bad news? Every change hurts some people and benefits others. House price drops could definitely be bad news for sellers with little to no equity. They could result in homeowners being forced to sell at a loss and still have to pay off their mortgage (or go bankrupt). On the other hand, sellers with plenty of equity might be quite happy to see house prices drop. They will get less for their current property but should pay less for their next one. First-time buyers would probably be delighted to see house prices come down for any reason. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The introduction of the SDLT (Stamp Duty) holiday sparked a frenzy in the housing market. Realistically, it was only to be expected that the end of the tax break would lead to a slowdown. Just like people, there’s a limit to how long markets can run at maximum speed. The key question, however, is, how much has the market slowed down? In other words, is it still a seller’s market or do buyers now hold the upper hand? Sellers’ markets vs buyers’ markets It can sometimes be very hard to judge whether the UK’s housing market favours buyers or sellers. There are three main reasons for this. Firstly, the UK’s housing market is made up of multiple local markets. In fact, local markets can often be subdivided into micro-markets. Secondly, all sellers and buyers are individuals. That means some will be under more pressure to move than others. Thirdly, there are multiple factors that can influence the general direction of the housing market. Again, the impact of at least some of these factors can, and often do, vary from one place to another. For example, overall employment may be trending upwards but a specific area may just have lost a major employer or vice versa. With all that said, there are still indicators that can suggest the overall direction of the housing market. Here is a quick guide to some of them and how they look at the moment. Inflation Inflation effectively tends to favour sellers because it can make buyers feel under more pressure to move. This could be more psychological than practical (fear of missing out). In many cases, however, there can be a strong practical element to it. A rising tide floats all boats. In the context of the housing market, that means house prices go up across the board. That means buyers either need to buy a smaller property (if that’s possible) or pay more. Paying more requires a bigger deposit and/or a higher loan-to-vehicle ratio. Neither of these is a good prospect for buyers. Inflation can also encourage sellers to become more determined to achieve the maximum, possible sales price themselves. Again, in some cases, this may be a matter of necessity. If a seller is also a buyer, then the same inflationary pressures will apply to them. Interest rates Lower interest rates make it harder to save for deposits but easier to afford mortgages. Even though lenders have to consider the impact of rate increases, those increases would still be coming from a very low base. The deposit is still a relatively small part of the cost of a house, therefore, overall, lower interest rates tend to be beneficial for sellers. By making it easier for people to afford mortgages, lower interest rates can help to increase the pool of potential buyers. This helps to stimulate competition between buyers and hence can push up prices. Again, however, this is something of a double-edged sword in that it applies to sellers who are also buyers. With that said, onward movers who have built up equity in their homes may find it easier to put up a substantial deposit on a new property. The job market It will probably take until early 2023 at least before there is a clear picture of the core health of the UK’s job market. At present, the UK, like many other countries, is still on the rebound from the impact of COVID19. Also, many companies take on extra staff over the festive season. Healthy job markets also tend to benefit sellers as they make it easier for people both to save for deposits and to afford mortgages. The overall picture Right now, the overall picture in the UK is still broadly favouring sellers. It is, however, very possible that will change in the near future if the economy slows down. This could result in a reduction in buyers as people become less willing and/or able to commit to mortgages. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Before 2008, the big choice for homebuyers was between interest-only mortgages and repayment mortgages. Now, it’s between tracker mortgages and fixed-rate mortgages. Both tracker and fixed-rate mortgages can be (and usually are) issued on a repayment basis. There are, however, significant differences in what they can mean for your finances. The basics of trackers vs fixed-rate deals Tracker mortgages are set at a certain percentage above the base rate. Fixed-rate mortgages have a set mortgage rate. Both tracker and fixed-rate mortgages are issued for an agreed term. This is typically (much) shorter than the mortgage amortisation period. For example, a term may last one to five years. A mortgage amortisation period may be twenty to thirty years. After this, borrowers either get a new deal or go onto the lender’s standard variable rate. What this means in practice is that tracker mortgages directly push the risk of interest-rate rises onto the borrower. If interest rates go up, the lender simply increases the borrower’s repayments to compensate. Fixed-rate mortgages push them directly onto the lender. Indirectly, however, they are still pushed back onto the borrower. The reality of fixed-rate mortgages At the end of the day, commercial lenders, by definition, are in business to make money. Part of this means avoiding excessive risk-taking (especially in the light of 2008). They are therefore going to be very careful to avoid setting fixed-rate deals overly low. In other words, they are going to make sure that they have breathing space if interest rates go up. This means that, realistically, borrowers should not expect to get significant protection from interest-rate rises. They should also be clear on the fact that they will not benefit from interest-rate falls. The term “fixed rate” means exactly what it says. At most, they will come out more or less even. They will pay less if rates go up but more if they go down. Realistically, they have to consider the possibility that the lender’s margin of error (or margin of safety), will result in them paying more overall. For some people, this may be an acceptable trade-off. If you’re on a fixed income, then knowing what you’re going to pay from one month to the next can make it much easier to budget. For others, however, paying interest to a lender when you don’t have to is totally unacceptable. It’s a waste of money that the borrower could have used for other purposes, be that work or play. In fact, it could even lead to borrowers spending much more than they needed to on their mortgages. The importance of mortgage terms Like everybody else, lenders find it easier to see into the near future than the distant future. That’s why mortgage terms are generally much shorter than the mortgage amortisation period. Essentially, at the end of each term, the borrower renegotiates their mortgage. On the one hand, this approach creates extra administration for both lenders and borrowers. On the other hand, it also promotes safety for both of them. From a lender’s perspective, it limits their exposure if circumstances change either in the market or for the borrower. From the borrower’s perspective, it means they can leverage the equity they are likely to have built up in their house. This will lower the loan-to-vehicle ratio and hence potentially give them access to better deals. The more borrowers have managed to pay down their mortgage, the better a position they will be in. This is why borrowers on tracker mortgages could end up substantially better off than borrowers on fixed-rate deals. If they manage their finances well, they can pay down their mortgages quicker. This minimises the amount of interest they pay to their lender and, hence, leaves them better off overall.