What can Harborough house hunters and savers expect from the 2020s?
The last ten years have been eventful - we’ve seen a financial crash, Brexit twists and turns, several Prime Ministers and a backdrop of record low interest rates.
In the same period Harborough has grown considerably with thousands of new homes across the district and many more planned.
The East Midlands economy has fared better than much of the country and forecasts suggest it will continue to outperform most regions outside of London and the South East.
With this in mind, René Butler speaks with Mark Robinson from Market Harborough Building Society to find out what he thinks will happen in 2020.
What will happen to House Prices and Rents?
The market has been subdued for a couple of years with almost stagnant prices but it’s expected that the East Midlands will “hold its own” compared with the UK overall. Forecasts from market analysts KPMG suggest regional average house prices at the end of 2020 will be £191,000 in a Brexit “deal” scenario but only £177,000 in the case of no deal Brexit.
Local demand for first time buyer homes remains high and we may see bigger price rises than with larger homes. I expect factors such as energy efficiency and risk of flooding to become
more prominent, which could make older homes less attractive in the future.
The political fate of Inheritance Tax and Stamp Duty thresholds may become a major influence since both will impact many families in Harborough.
Across the district rents have grown faster than pay, making affordability an increasing issue with workers who typically spend 25% of earnings on rent. Rent rises locally may continue if landlords move out of the market due to less favorable tax treatment. Properties now being used for letting, often acquired as nest eggs by amateur landlords, will come back onto the market as homes for sale, reducing the supply of properties for rent.
What will happen to Savings Accounts such as ISAs?
The Bank of England base rate stands at 0.75% and hasn’t been higher than this since 2009. This last ten years of low rates and Government schemes to boost lending have meant
banks had little appetite for savers’ money – depressing rates.
A low interest rate market is likely to persist and finding attractive and safe savings options will be tough. Savers should be wary of “high paying” accounts which may risk your money
while not benefiting from the protection of the FSCS (Financial Services Compensation Scheme) in the event of problems.
Conventional wisdom on ISA accounts is also breaking down. The rules on the savings allowance changed in 2016 to allow basic rate tax payers £1,000 per year interest tax free (higher rate tax payers get £500 per year). As a result, the tax-free status of ISAs is now less important. This is because with an interest rate of, say, 1%, you need to have savings of £50,000 as a basic rate tax payer to make the tax shelter of an ISA meaningful. Most cash savers will do better looking at highest paying savings rates and be indifferent as to whether this is with an ISA or non-ISA account.
How will Mortgages change in the new decade?
Although mortgage rates may also stay low, getting started is a big issue in Harborough, like much of the UK, as saving even for a 5% deposit and costs (likely more than £10,000), is tough. Mortgage terms are getting longer, this may reduce the monthly payment, but it increases the overall final repayment.
I fully expect that 50 year mortgages may become common as retirement ages rise and people live longer. Increasingly, mortgages are being held by borrowers into their seventies.
Political uncertainties aside, Harborough district should be well positioned for the 2020s. It is an attractive place for both business and employees. Strong employment and convenient
travel links. The challenges of finding a home may ease slightly as house prices growth slows and wage inflation moves into positive territory.
We should look forward to the new decade with some optimism.