Predicting how the UK’s housing and mortgage market will shape up in the year ahead is certainly more of an art than a science in the wake of a highly eventful 2016, however some outcomes are more likely than others in 2017.

For example, mortgage experts believe that the biggest trends of this year will be a continued slowdown in house-price rises and a potential increase in mortgage rates, with issues around what may or may not happen regarding Brexit.

Let’s take a look at several key areas and what is predicted.

First, gross lending is unlikely to change much in 2017, according to industry professionals. The Council of Mortgage Lenders predicts £248bn of gross lending this year – up by less than 1% from the estimated £246bn for last year and down from its original forecast of £261bn, which was made before the start of 2016. On residential property transactions, it expects a reduction from 1.24 million last year to 1.17 million in 2017.

The mortgage market remains resilient but is likely to plateau rather than grow much for the next couple of years.

House prices
As with lending, the general forecast for house prices is of a slight rise only – Nationwide expects about 2% growth in 2017.

The building society’s figures showed prices rose by 4.5% last year, meaning the average price of a home is now £205,898, more than seven times average earnings.

It is no wonder the Local Government Association revealed last month that, while 46% of 25-year-olds owned their home 20 years ago, only a fifth of the age group is on the housing ladder today.

Nationwide chief economist Robert Gardner says: “Like most forecasters, we expect the UK economy to slow modestly, which is likely to result in less robust labour market conditions and modestly slower house-price growth. But we continue to think a small gain – about 2%– is more likely than a decline over 2017 because low interest rates are expected to help underpin demand, while a shortage of homes will provide support for house prices.”

RICS (Royal Institute of Chartered Surveyors) predicts 3% growth in house prices this year, agreeing that the supply shortage will worsen the effect of the uncertain economic climate.

The Government has made a number of recent announcements of its plans to boost housebuilding – such as the £7bn fund made available to housing providers – but construction levels are relatively low, falling short of the 250,000 new homes that many, such as housing charity Shelter, believe are needed each year to keep pace with demand.

Government statistics for the 2015/16 financial year show construction began on just 172,080 homes.

Mortgage rates
While the forecasters predict not much movement in lending or house prices, most commentators believe there could be a significant change in mortgage rates – with rises likely.

Rates hit rock bottom in 2016, highlighted by HSBC’s record-low two-year fixed rate at 0.99 per cent, which was pulled in December. Longer-term fixes were also on the up as this year began.

It was when HSBC put up its rates that many took notice. It drew mass headlines and shone a spotlight on rising swap rates, which have a large bearing on borrower rates.

HSBC’s super-cheap deal was on the market for six months but no one expected it to last forever. When the lender pulled the deal it did not herald a sudden domino effect of rate hikes but there is a fear of gradual rises in 2017.

The Financial Planning Group’s mortgage advisor, Steve Padgham, says; “Most experts accept that mortgage rates are unlikely to get better, however, there are some fantastic deals still available and now is an excellent time to be considering a new mortgage or re-mortgage deal.”

This upward movement does not mean the market will be devoid of competitive rates in 2017, however. After all, historically any fix below 2% has been very cheap, albeit we have got used to such lows. There are still competitive offerings out there, which will continue.

Some experts believe that any tide of rising mortgage rates would bolster remortgage levels. LMS chief executive Andy Knee says: “If mortgage rates climb, we expect more homeowners to take advantage and fix by remortgaging.”He adds that the LMS outlook for remortgaging is “optimistic”. Of course, any house-price and rate growth would make things even harder for the army of wannabe first time buyers.

April will bring the launch of the Lifetime Isa. This will work in a similar fashion to the Help to Buy Isa for those under 40; the state will add a 25% bonus on up to £4,000 saved each year – making a maximum of £1,000 annually. The funds can be used as either a homebuying aid or a retirement pot.

From April last year, anyone buying a second home had to pay an additional 3% in stamp duty; and from this April a ‘revolution’ will begin whereby landlords will no longer receive higher-rate tax relief on mortgage interest by 2020.

Lending criteria
If that was not enough pain for prospective investors, lending criteria have got tougher this year under rules from the Prudential Regulation Authority. These include requiring lenders to assess borrowers’ ability to repay a 5.5% rate, regardless of what they actually pay, when determining their mortgage suitability.

Buy to Let lending was hit hard last year, with just 100,000 homes purchased this way compared to 118,000 in 2015. This number is predicted to fall further, to 85,000 this year and 80,000 in 2018.

That is not to say that Buy to Let option of investing in property is not still a good option for some people, and here at The Financial Planning Group we have access to the whole market with the ability to reserve a mortgage deal six months in advance to ensure the best rates are ring fenced for our clients.

If you would like to speak about your mortgage or re-mortgage, and secure one of the record low deals that are currently available, please feel call Steve Padgman on 020 8614 4782 or email


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