Eight years ago in the summer of 2007, hardly anyone had
heard of the term ‘credit crunch’, but now the expression has entered our daily
language and even the Oxford Dictionary.
It took a few months throughout the autumn of 2007, before the crunch
started to hit the Solihull Property market but in November / December 2007 and
for the following seventeen months, Solihull property values dropped each and
every month like the proverbial stone. The Bank of England soon realised in the
late summer of 2008 that the British economy was stalling under the continued
pressure of the Credit Crunch. Therefore between October 2008 and March 2009,
interest rates dropped six times in six months from 5% to 0.5% to try and stimulate
the British economy.
Thankfully after a period of stagnation the Solihull
property market started to recover slowly in 2011, but really took off strongly
in late 2013 / early 2014 as property prices started to rocket. However the
heat was taken out of the market in late 2014/early 2015 with the new mortgage
lending rules and some uncertainty, when some residents had a dose of
pre–election nerves.
With the Conservatives having been re-elected in May the
Solihull property market regained its composure and in fact, there has been
some ferocious competition among mortgage lenders which has driven mortgage
rates to record lows. Whilst I have no actual figures to back this up, I know
an awful lot of long serving bank managers, mortgage arrangers and people in
the finance industry, all of whom have told me on previous occasions when
interest rates rose (1987, 1992, 1997 and 2003), it wasn’t the first rate rise
that was the catalyst for many homeowners and landlords to remortgage but the
second or third increase. The reason
being that it was only by the time of the third rise in the rates, that it
started to hit the wallet. However, the
issue is, by the time of the second or third r rise, the best fixed rates, were
in all instances, no longer available as they had been pulled by the banks
months before.
But here is the good news for Solihull
homeowners and landlords, over the last few months a mortgage price war has
broken out between lenders, with many slashing the rates on their deals to the
lowest they have ever offered. I read
that the well respected UK financial website Moneyfacts said only a couple of
weeks ago, that the average two year fixed rate mortgage has fallen, 12 months
ago from 3.6% to just under 2.8%.
Interestingly, according to the Council of Mortgage Lenders,
the level of mortgage lending had soared to a seven year high in the UK . So what about Solihull ? In Solihull , if you added up everyone’s mortgage, it would
total £2.8 billion. Even more
interesting is when we look at Solihull and split
it down into the individual areas of the town,
- B90 - Shirley, Solihull
Lodge, Majors Green, Dickens Heath, Cheswick Green £825.3m
- B91 - Solihull £742m
- B92 - Olton, Elmdon,
Bickenhill, Hampton-in-Arden £604.1m
- B93 - Knowle £446.3m
- B94 - Hockley Heath,
Earlswood £202.4m
Since 1971, the average interest rate has been 7.93%, making
the current 0.5% very low. So, if
interest rates were to rise by only 2%, according to my research, the 11,147 Solihull
homeowners, who have a variable rate mortgage would, combined, have to pay an
approximate additional £31,920,000
a year in mortgage payments.
That means every Solihull homeowner
with a variable rate mortgage, will on average have to pay an additional £2,864 a year or £239 a month in interest payments.
I know over the last couple of posts, I have talked about
mortgages a lot however, I am not a mortgage arranger but a letting / estate agent and as regular
readers know, I always talk about what I consider to be the most important
issues when it comes to the Solihull property market and at the moment, in my
humble opinion, this is the most important thing!
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