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There is no doubt that we are seeing a temporary slowdown in the UK property market as we approach the General Election – although the recent report from the Royal Institution of Chartered Surveyors (RICS) might suggest that the trend is changing. Political uncertainty over proposals such as the mansion tax and stamp duty rises for luxury homes have caused an adjustment at the top end of the market in the final quarter of 2014 and the first quarter of 2015.
The difference between the average price of property in London (£408,780) and the UK as a whole (£188,566) is as great as it has ever been, according to the Nationwide’s latest figures (Nationwide House Price Index Q4 2014). However, the gap is no longer increasing as it did from 2012 to 2014.
Of particular interest to readers who live in London and the South East of England is the fact that the price gap between London and the Outer Metropolitan area has closed slightly from £105,118 in Q4 2014 to £101,849 in Q1 2015. There will be a more significant adjustment when mortgage rates do start to rise, as they will have a greater effect on larger mortgage loans in London. So it might pay to be an early bird and enjoy the value there is to be had in prime locations around the M25.
Our view is that longer term fixed rates are likely to start edging up after the election to the year end; it could be a great time to fix now if you value the security of knowing what your monthly repayments will be for the next few years. There is no upward pressure on short term rates, so if flexibility is important then borrowing at a variable rate offers at least a 0.5% saving on a fixed rate for a similar mortgage.
Of course if you wish to retain your investment in London (or any other area of long term house price inflation) you might consider ‘let to buy’, where you keep your existing property and rent it out, at the same time as buying your new home. You are likely to need bespoke property finance to support this type of transaction and it pays to take independent professional advice in such a specialist area. If you are moving out of London, make sure you contact a London mortgage broker who has in depth knowledge of the particular factors at play in the London property finance market.
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