An outlook on the mortgage market over the next 12 months

The UK mortgage market has weathered unprecedented economic volatility during the last 12 months.

Signing a mortgage with a solicitor for a residential property

Our January 2021 departure from the European Union (EU) as a result of the 2016 Brexit referendum led to huge levels of uncertainty, particularly as a deal was only finalised at the last minute in December 2020.


At the same time, the arrival of the COVID-19 pandemic put intense pressure on the UK mortgage market. The first lockdown restrictions in March 2020 saw the housing market effectively shut for seven weeks but, thanks to Chancellor of the Exchequer, Rishi Sunak’s stamp duty tax cut, demand for property has continued with sales going through the legal process. Such turbulence within a year has rarely been seen but what do the next 12 months look like for the property market?


Ongoing stimulus


After the property market saw a significant slowdown during the first lockdown in March 2020, Chancellor of the Exchequer, Rishi Sunak, took decisive action with his stamp duty holiday.


As lockdown restrictions have extended, Sunak has chosen to continue the stamp duty cut in line with these restrictions.


This led to an unexpected housing boom with house prices rising by 2% during August 2020, the highest monthly increase since February 2004.


It is now likely that this will keep the property market buoyant, at least until the second half of the year. The question now is, how sharp will the expected slowdown in sales be after this support has been withdrawn?


Wider economic issues


While the property market has been protected by the additional stimulus, the wider UK economy has been ravaged by the COVID-19 crisis.


Unemployment reached a five year high in the period between November and January with 1.7 million people out of work, according to recent figures. This could rise to 2.2 million over the course of 2021, before rallying and recovering in 2022 as lockdown restrictions ease even further.


The pandemic led to the biggest fall in UK gross domestic product (GDP) for more than 300 years in 2020, dropping by a record 10%. This could continue to have an impact on the property market and the ability for first-time buyers in affording to take their first steps on the property ladder, particularly as many of the under-25s have been hardest hit in terms of unemployment.


Brexit


Despite all the uncertainty leading up to the end of 2020 surrounding the UK’s departure from the European Union, the impact on the property market has been overtaken by the pandemic. Brexit has hit commercial organisations, which trade with the companies and states within the EU due to the new regulations and agreements now in place. But the UK’s residential property market depends on domestic legislation, meaning Brexit has had little impact since a deal was brokered.


COVID-19


With the UK’s vaccine roll-out being a world-leading programme with over 29 million people now having received their jabs, the future looks positive. As long as the second doses can be administered effectively and new COVID-19 variants contained, restrictions will hopefully ease and the economy can open up once again. It is, of course, difficult to say what might happen in the next 12 months due to the unexpected crisis of the previous year, but we remain cautiously optimistic about the property market’s future.