Is now the best time to plan moving home?
With a budget announcement & base rate review looming in coming weeks, is now the right time to think about buying and selling property?
As inflation continues to decrease, analysts anticipate the Bank of England base rate will dip below 5% during the upcoming announcement scheduled for 7th November 2024.
What is the difference between a base rate and an interest rates?
The Base Rate is the key interest rate in the UK set by the Bank of Englands Monetary Policy Committee (MPC). It influences many other interest rates in the economy, including the lending and savings rates offered by high street banks and building societies.
The interest rate tells you the cost of borrowing money, or how much you will earn in return on an investment. If you’re borrowing money, such as a mortgage, the interest rate is the amount you are charged for borrowing money, shown as a percentage of the total amount of the loan. The higher the percentage, the more you have to pay back.
The savings rate tells you how much money will be paid to you on top of what you have, as a percentage of your savings. The higher the savings rate, the more will be paid into your account for a given sized deposit.
For large purchases such as a property, a small change in interest rates can have a big impact on your costs so it is important to monitor the movement if you are looking to buy a property either as a home or an investment.
Other factors determining the rate to you is the level of risk to them and how long you want to take out a loan or mortgage for, often determined by your age.
How is it linked to inflation?
The MPC uses the base rate as a mechanism to help control inflation, which is the rate at which all living prices rise. The UK Government set a goal to keep inflation at or close to 2%. Inflation peaked at 11% at the end of 2022 but has now fallen to 1.7% (as at 22/10/24).
What could this mean for mortgages?
For buyers contemplating a property purchase or remortgage, this is likely to mean more competitive mortgage interest rates. Trends suggest a reduction in the base rate will lead to an increase in the number of potential buyers looking for their next property move.
Capital gains tax (CGT)
The Autumn budget will be announced on 30th October and new reports suggest ministers have decided to leave CGT levied on the sale of second homes and buy-to-let properties untouched. Property investors will therefore be exempt from CGT which will support landlords and encourage them to stay in the market. If it had been increased, the UK could have lost about 1 million rental properties which would put huge pressure on the rental market and available properties in the sector.
Whether you are looking to invest in property for the first time or as part of a portfolio, it is advisable to invest as a Ltd company rather than your personal name to avoid being subject to CGT and section 24. Please contact our lettings teams for more advice.
Stamp Duty (SDLT) - changes from 01/04/2025
Last month we shared a blog on the upcoming changes to SDLT highlighting that the current nil rate banding on purchases up to £250k will be decreased to £125k. It is intended that the thresholds for first time buyers (FTB’s) will also change as the nil rate threshold currently up to £425,000 is due to decrease to £300,000 from 1st April 2025. The decrease of £125,000 means that FTB’s will need to find an additional £6,250.00 for the equivalent property as the transaction value will put them in the 5% banding. Moreover, the maximum purchase price for which FTB’s relief can be claimed is intended to decrease from £625,000 to £500,000. As a result, anyone looking to purchase now, particularly first time buyers will be keen to complete the transaction before 01/04/2025.
Time to plan ahead
If you have a property to £625,000 which is likely to appeal to first time buyers before the SDLT rate changes, now is the ideal time to consider putting on the market as you are likely to have more interest and competition between buyers to achieve the price you want.
Therefore, now is an ideal time to engage with estate agents for a property valuation and prepare your home for a potential sale. It is also important to talk to agents about how to make your property stand out from the rest if there is more choice for buyers. The more click throughs/interest/viewings an agent can generate, the more likely they will be able to negotiate you the highest possible price.
When demand for property escalates owing to market changes such as interest rates, having multiple interested parties vying for a property is not uncommon. To position yourself favourably as a buyer in such scenarios, ensure that you are prepared to move should you find your dream home. Being in a proceedable position, an estate agent term meaning that you are actively on the market, under offer, or chain-free and have a mortgage agreement in principle can be advantageous in competitive situations.
For those with aspirations to buy their first or next property, by implementing proper planning and timely actions, you can put yourself in a strong buying position. Although market conditions are influenced by various factors, including economic indicators and policy changes, with the right guidance and expert advice, you can navigate the property market efficiently.
Now is also a good time to familiarise yourself with existing properties on the market to help determine what you might be looking for. Take the opportunity to look at how different agents present their properties, how much attention to detail goes into preparing the particulars and which listings stand out most for you. This will help you choose the best agent with the highest attention to detail to represent you.
We would also advise speaking to an independent mortgage advisor at this point so you are ready to access new rates as soon as they are available. By leveraging this knowledge and working collaboratively with estate agents, prospective buyers can enhance their chances of successfully purchasing a property in a rapidly evolving market.
In anticipation of announcements being made which are favourable to buyers, now is the time to start researching mortgage options alongside seeking expert advice from estate agents. This allows you to position yourself strategically in the market and are more likely to have your offer accepted if you find your dream home.