In Chancellor Rachel Reeves’ Spring Statement on 3rd March, she focused on growth, living standards and employment. But as she promised better days ahead for the economy, world events threatened to overshadow the good news.
So, what do the latest predictions mean for UK homeowners and renters, or those struggling to get on the housing ladder? Will they affect the cost of living and mortgage rates in the UK?
Accurate forecasting is never easy, particularly in times of geopolitical unrest, but our estate agents in Ilford have risen to the challenge. They have teamed up with our estate agents in Newbury Park to explain what the latest news could mean for householders in east London.
What is the Spring Statement?
The Chancellor makes two major reports on the UK economy each year. The primary annual event is the Autumn Budget, when the government sets fiscal policy for the year ahead and announces any new tax or spending measures.
The Spring Statement is considered to be less important. It simply provides an update on forecasts produced by the Office for Budget Responsibility (OBR), to show how the UK economy is shaping up.
This year Rachel Reeves was able to identify some signs of improvement in the UK economy, but there are concerns these could be overshadowed by issues that flow from the Iran conflict.
What did the Chancellor say in the Spring Statement?
The Chancellor declared that disposable income is set to grow at a faster rate than previously forecast. She suggested that by the time of the next election, households could potentially be better off by £1,000 per year.
According to the OBR, unemployment will continue to rise to 5.3 per cent this year but is likely to drop away to 4.1 per cent by 2030. The growth outlook for the country has been revised slightly down, from 1.4 per cent predicted in the last Budget to 1.1 per cent. However, growth is expected to rise to 1.6 per cent over the next two years.
No changes to pensions or ISAs were announced at this time. The Chancellor also reported that the cost of government borrowing is projected to fall, allowing for more leeway to cut taxes or increase spending.
Will the average interest rate on mortgages change?
Since interest figures peaked at 11.1 per cent back in October 2022, the Bank of England (BOH) has been adjusting the rate, aiming to achieve a target level of just two per cent inflation.
The government had been expecting to reach their target later this year. But if the Middle East conflict continues, there’s a risk that the cost of living will go up, inflation will rise and mortgages could become less affordable.
The BOH’s Monetary Policy Committee will meet again on 19th March to discuss further changes to the base rate (which affects mortgage costs). Rumours currently suggest that the rate could rise, rather than fall again, pushing up the cost of mortgages. Nationwide Building Society, HSBC UK, NatWest and other high street lenders have already started to make upward adjustments to the cost of their mortgage products.
Borrowers who need a fixed-rate mortgage to assist with planning and budgeting should consider securing a deal as soon as possible. Rates can usually be booked in up to six months ahead.
What will happen to house prices?
Prices continued to rise last year in high demand areas such as Havering, Barking and Dagenham, Tower Hamlets, Hackney and Waltham Forest. In other parts of London property prices slowed, as home movers waited to see what the Autumn Budget would bring.
Although experts were expecting a surge in demand this spring, some buyers are still holding back, waiting to see if mortgage rates will fall again. This has led to a slightly more sluggish market, but one where correctly priced properties continue to sell. As always, there is high competition for quality family homes in popular areas.
Going forward, much will depend on the outcome of the global situation: if an end to the conflict can be achieved in a matter of weeks, the OBR’s economic forecasts could remain on track and interest rates may continue to fall.
Whatever happens, our estate agents will be working hard to keep you up to date with all the latest information.
Is spring a good time to move?
Many homebuyers, particularly those with young families to consider like to start their home search in the spring. That means they can co-ordinate their house move with the school summer break.
If you are considering buying or selling a property in East London, we would love to hear from you. Our local experts are equipped with the latest property knowledge, ready to help you make the most of your property sale or purchase. Why not contact our friendly sales team today?
Call us at 020 3972 7341 or email info@oaklandestates.co.uk
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