The small light at the end of the tunnel is that the Monetary Policy Committee may be considering a base rate cut despite spiralling inflation.
With MPC member David Blanchflower be-coming increasingly vocal about the need to slash the base rate, there’s a little more impetus for a cut. This should improve consumer confidence in the market but cuts are some way from being a nailed-on certainty.
Speculation that the government would provide a Stamp Duty holiday across the board has thankfully been laid to rest with its announcement that only properties worth up to £175,000 will escape the tax for one year. This appears to be aimed at incentivising first-time buyers.
But on its own, it’s unlikely that the Stamp Duty holiday will cause a dramatic upturn in first-time buyer activity. When prices fall 1.9% over the course of one month, the prospect of saving 1% on the tax would not seem enough to tip the scales. But it is easy to criticise the government’s plan and it’s better than doing nothing.
As part of a wider package, which also includes more equity loan funding, the move is a positive step for consumers contemplating their first step onto the property ladder.
Product cuts have been the only good news stories in recent weeks, with lenders once again actively competing on rates.
The numerous changes have heralded rate reductions and there are certainly some tit-for-tat cuts being made by lenders to maintain their market positions.
But while this is positive it could encourage some borrowers to adopt a wait-and-see app-roach in the hope that they will bag better deals if rates continue to fall – a far cry from the rush to secure finance seen earlier this year.
This approach is not without risk. With the trend of falling house prices unlikely to reverse in the short to medium term, there are potential downsides.
A knock-on effect of prevailing market conditions is that downvaluations have become more commonplace. This coupled with the fact that most lenders are now offering their best products to consumers with substantial amounts of equity could see delays tipping borrowers into higher LTV brackets.
Higher LTVs mean higher interest rates and any savings made by waiting for further rate cuts could be wiped out by falling property values. So even with better rates there is no room for clients to be complacent.