Volumes are up and interest rates stable in the UK housing market
UK-based buy-to-let mortgage broker Offshoreonline has reported its best figures for expat mortgage enquiries in March 2023 since before the pandemic. In fact, volumes are now equalling pre-pandemic levels.
“In a very short space of time, the main structural issue with the UK housing market, a lack of supply, seems to have been turned around,” says Guy Stephenson from Offshoreonline.org. “If anything, we’re now seeing an excess of supply over demand. This makes UK house prices attractive for expat home buyers. They have more choice, and sellers will be more likely to take a good offer, given the shortage of UK buyers as a result of a rise in UK mortgage rates.”
Property portals such as Zoopla and Rightmove are reporting the supply of houses put on the market is increasing month on month. The trend started in January 2023, when listings rose by 5.9%. It then continued in February with the figures rising 28%. Now, in March, the listings recorded by estate agents are up a further 17%, according to Rightmove.
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Decline and recovery
Highlighting the sometimes contradictory picture in the UK housing market, Guy says, “The Bank of England began pushing the UK base rate sharply higher, mainly from August 2022. Therefore, UK mortgage rates inevitably rose steeply too. This caused a market shock, and housing demand declined rapidly in late 2022.
“Despite the headlines suggesting a demand collapse, the UK house price reports such as those produced by Halifax, Nationwide and the UK government reveal that, over time, UK house prices in the better quality areas have stood up, mainly because supply has been so limited. With strong demand chasing a very limited supply, house prices in the UK have remained firm in these areas.”
If you’re someone who held off on a buying decision, now could be a very good time to make a move. The supply of houses for sale has shown a rapid recovery, increasing choice and making the UK housing market very attractive for buyers. At the same time, major mortgage lenders have released lower expat mortgages rates in the UK.
The Birmingham Bounce
Offshoreonline quotes the example of a client based in Singapore who, having spent months searching for an investment apartment, finally reluctantly put an offer on one in Birmingham at just over £200,000. The flat came with a tenant in situ, but when the service and ground rent costs were factored in, eventually they concluded it didn’t make financial sense.
Having spent most of 2022 house hunting, they therefore withdrew from the purchase in March this year. Within one week, they found a larger, more suitable terraced house at just below £200,000 with no service charges, which transformed the financial case for investing. The whole deal, from search through to offer and acceptance, was completed in under eight days.
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What do Singapore-based expat buyers need to get a UK mortgage?
According to Offshoreonline, there’s not only a wide choice of expat mortgage lender, but the application process is also simple. Buyers will need a deposit of at least 25% of the sale price. They’ll also need to confirm their employment status and where they live in Singapore, perhaps with a local utility bill. Apart from that, the property’s rental potential will be a key factor. Houses need to generate a minimum of £510 monthly rent for every £100,000 borrowed.
Are UK mortgage rates going up or down?
After the chaos of the mini budget in late 2022, happily, markets have settled. The UK economy is still performing well. It has avoided recession and retail sales are still stronger than most people expected. So, Offshoreonline expects the UK base rate to stay at current levels for a while.
“We’re not going to get back to the unnaturally low UK base levels seen over the last 10 years as ultimately these were due to the Bank of England intervening to offset the dramatic impact firstly of the financial crash in 2008 and subsequently the pandemic.
Whilst forecasting interest rates is virtually impossible, our view is that the long-term average for the UK now is probably a UK base rate in a range somewhere between 2.5% to 4%, or perhaps a little more, with mortgage rates around 1% above these figures. We currently have a range of lenders offering expat mortgages from 4.99% to 5.40%. So there’s a good amount of choice,” says Guy.
By Kaur Harsharan
Source: Expat Living