The Royal Institute of Chartered Surveyors (RICS) have revealed that most surveyors have said that house prices in London have fallen as a result of Brexit. It will be some months before the true extent of the drop is known, but it is widely acknowledged that the rest of the UK has since seen prices on hold, whereas the capital has declined.
There are many reasons for this, but it is now time to ask the question whether now is the time to get a mortgage in London?
Why Have Prices Decreased?
Brexit is something that the capital will always feel much more than any other part of the country. London is the largest financial hub in the world, and most of its capital relies on being in the EU and being able to enjoy the benefits of the single market. With that now being called into question, it has forced house prices down.
A lot of individuals and businesses have halted their plans to come to London, and that has caused house prices to dip slightly. RICS say that the increased stamp duty levied on second home buyers and landlords is part of the reason why the slowdown has happened in London.
So is it Time to Get a Mortgage?
Interest rates are largely expected to drop by the end of the summer. That will make it cheaper than ever before to hold a mortgage. If the worst financial predictions are realised, this could mean that getting a mortgage could mean 0% interest rates. You would only be paying for extra equity, rather than the dead money that is interest.
That reason alone is the reason to get a mortgage, but whether it is time to get a mortgage in London specifically is another question entirely.
What all a decrease in house prices means is that you will ultimately have to take out a smaller mortgage, or you may be able to pay a lower deposit. The banks are not going to react as quickly as the markets, and so you have to be prepared for not much of a change when you apply for a mortgage.
But the longer term view is a reason to take out a mortgage in London right now.
You Will Make Money
If you are able to secure and sustain a mortgage in London now, you are all but guaranteed to make money in the long-term. In the same RICS survey, they said that in the longer term values are going to rise by 14%. And interest rates are not expected to increase for some time.
They are only going to go down, and due to the uncertainty over Brexit, there is no reason they are going to rise soon after that. Judging by how long the Bank of England has held interest rates at 0.5%, they are not afraid to maintain low interests for an extended period.
For every month that interest rates remain at record lows, you are saving more and more money.
Stress Test Your Mortgage
Taking out a mortgage in the capital is not something you do lightly. Bear in mind that if interest rates do rise the amount you have to pay every month could rise by hundreds of pounds. You are always playing with bigger numbers in London, so even the slightest change could mean a lot.
There are plenty of mortgage calculators online that will help you to understand how much you would have to pay every month if interest rates rose. Make sure you leave yourself a good cushion so you can stomach any rises, in the event that it occurs.
What do you think is the best option for home buyers in London this year?