Interest rates: one less uncertainty
Following the news that interest rates have increased for the first time in 10 years, Mishon Mackay Land & Development Director Matthew Hollywood shares what this means for New Homes developments.
As predicted, interest rates have been increased. The tone and manner in which it was delivered would suggest that a further similar increase mid-next year is also highly likely, as the Brexit negotiations gather pace. But this slow, managed increase will at least enable homeowners to plan ahead. So, theoretically, New Homes buyers have one less uncertainty to deliberate over.
The unpredictability of Brexit, the possibility of stagnating house prices and the up-until-now threat of interest rate rises have had a cumulative effect on buyers, causing then to hesitate over committing – especially on early reservations and off-plan sales. So, as we say, theoretically this is one less element of confusion, as it becomes more a question of budgeting.
The remaining issues of Brexit and its impact on house prices are still genuine worries for new homeowners. However, we have seen a tangible disregard for both of these concerns once Help-to-Buy is introduced into the conversation, especially as off-plan sales come within the six-month ‘window of completion’. Buyers appear to be taking a view on the future value of these New Homes in favour of securing their home using the Help-to-Buy scheme. The hesitation from buyers remains prevalent, but quickly subsides once construction is progressing well and practical completion is in sight.
So while early reservations may remain scarce, we are confident that the demand for good quality, well designed and well delivered New Homes will remain strong. Although, admittedly, underpinned by the Help-to-Buy scheme.