Posted on September 29, 2022 September 29, 2022

What is happening to the UK property market

Whether you’re applying for your first mortgage, or you’re already a homeowner, you’ll know there’s a lot of news coverage about interest rates, inflation and mortgage loans right now.

So what’s happening, and why? How it might affect you will depend on what type of mortgage deal you’re looking for, or the type of deal you’re on – and how much longer is left on the term of your loan.

Plus, forecasts on rising interest rates are changing quickly, along with wider economic conditions. No one knows for sure what’s ahead, but we’re still seeing tens of thousands of people requesting to view properties each day, which is the same level that we’ve seen all month.

So if you are thinking of moving, or if your mortgage term is coming to an end soon, here we’ve tried to help answer some of the questions you might have.

Why are mortgage rates rising now?

Before this week, mortgage rates had already been increasing throughout the year. The Bank of England sets the ‘base rate’, which lenders use to set their own mortgage rates. In January of this year, the base rate was 0.25%. Since then, it has gone up incrementally and is currently 2.25%.

The Government sets the Bank of England an inflation target of 2%, but the current rate is 9.9%. It’s the Bank of England’s responsibility to make sure inflation is low and stable, so they need to bring inflation back down. The way they do that is by increasing interest rates.

The Bank of England forecasts inflation to rise to about 11% in October, and that it will stay above 10% for a few months before starting to fall.

Rising interest rates have led to an increase in the average mortgage rates that are available. As an example, if you have a 10% deposit and choose to take out a two-year fixed rate mortgage, the typical rate that was available in January was 2%. That increased to an average of 3.9% at the end of August. These rises had been predicted and lenders were able to factor them in gradually.

Mortgage rates have been rising further this week because when unexpected things happen in financial markets, they’re likely to have a direct impact. Last Friday (23rd September), the Chancellor’s mini-budget unveiled the biggest tax cuts for 50 years, including a stamp duty cut for home-movers in England and Northern Ireland.

This has resulted in a lot of speculation about how these cuts might impact the UK’s finances. The value of the pound has seen record falls, which is likely to drive inflation up further. As a result, it’s widely believed that the Bank of England may need to raise interest rates faster and higher than previously forecasted.

At the minute, there’s a suggestion from the financial markets that the bank base rate could rise to 5.8% by next spring. This has impacted the underlying costs of fixed-rate mortgages. This is why some lenders have repriced deals and others have temporarily removed some or all of their products. Some of the lenders who have withdrawn products are expected to return with new deals in the coming days and weeks.

How might increasing interest rates affect my mortgage?

If you’re a first-time buyer, moving home, or remortgaging, it’s likely you’ll be impacted by the changes. If you have a fixed-rate deal, the good news is that it will be business as usual, and your monthly repayments won’t change, at least until your current deal ends.

If you don’t do anything, at the end of your deal you’ll automatically move on to the lender’s Standard Variable Rate (SVR). These rates tend to be higher than other mortgage rates and are generally changed to reflect movements in the Bank of England’s base rate.

Take a look at how your repayments would change if you have a 25-year mortgage term and are looking at a fixed-rate for £200,000, based on rates increasing from between 2% to 6%.

Fixed mortgage rate (£200,000 over 25 years)	Monthly payments	Increase in monthly payments
1%	£754
2%	£848	+£94
3%	£948	+£194
4%	£1,056	+£302
5%	£1,169	+£415
6%	£1,289	+£535

If you’re among the estimated 15% of borrowers with a variable or a tracker mortgage, your monthly outgoings will almost certainly go up. The interest rate paid on tracker mortgages is usually anchored against the bank base rate plus a set percentage. For example, the current base rate of 2.25%, plus 1%, would mean you’d be paying 3.25% interest right now.

Can I still get a fixed-rate mortgage deal now?

Some lenders have withdrawn their fixed-rate products, while others have increased their prices in response to the rapidly changing costs of their funding. But it’s definitely worth finding out what your options are.

If you’re on a tracker or a variable mortgage, you could shop around to see if you can find a cheaper option with a fixed-rate mortgage. However, you might have to pay an early repayment charge first. You could speak to a qualified mortgage broker or adviser if you’re unsure which options would be best for your individual circumstances.

I’m on a fixed rate, what are my options when my deal ends?

If your fixed-rate deal is due to end within the next six months, you could see what your options are for locking in a deal now.

Many lenders will allow existing customers to apply for new deals up to six months before their current rate ends without having to pay an early repayment charge. This is often called ‘product transfer’ or ‘switching’. This is a relatively easy process as you’re staying with your existing lender, so you won’t need a solicitor or a property valuation, and there’s no need to prove your income.

If you’re looking to move lenders – whether you’re remortgaging or moving home – you may want to start well before your fixed-rate deal ends, as the application process can take several months or more.

There is so much fluctuation in the mortgage market right now, you might want to look at what your lender has to offer or speak to a mortgage broker to find out which deals are available to you.

Posted on April 18, 2022

House prices still rising but that could change soon

The current climate could be short lived

House price growth hit a five-month high in February, according to Land Registry data but there are warnings that this will be short-lived. The Land Registry’s latest House Price Index shows UK property values rose 10.9% annually in February 2022.

That is the highest growth figure since September 2021, which coincided with the end of the stamp duty holiday on purchases up to £250,000.

This puts the average UK property price at £276,755. Annual house price growth was strongest in Wales where prices increased by 14.2% in the year to February 2022.

The lowest annual growth was in London, where prices increased by 8.1% in the year to February 2022.

Overall, UK prices were up just 0.5% on a monthly basis though, which may reflect recent warns that growth is set to slow. Other data revealed in the index for December 2021 also showed a sharp drop in transactions. UK volume transactions decreased by 47.1% in the year to December 2021, according to Land Registry figures.

Sales in England decreased by 52.5% annually in England, by 18.1% in Scotland, 47.3% in Wales and by 16.9% in Northern Ireland.

“Soaring inflation, the rising cost of living, high energy bills and a lack of support from the government at last month’s Spring Statement mean many people are feeling the squeeze financially. The recent introduction of the new energy price cap and the national insurance increase has further heightened the pressure.

“With wages failing to keep up, the increased costs of moving home will likely put off prospective buyers and taking a first step onto the property ladder will be pushed out of reach for many. As a result, we could see house prices dip over the coming months.

“While house prices have remained robust for the time being, how the housing market truly reacts to the current circumstances is yet to be seen. However, it is unlikely that house prices will be able to continue rising at the same rate seen in recent times – particularly against the backdrop of an economy already trying to recover from the impact of the pandemic.

“If a slowdown does begin to materialise, a gradual fall in house prices is expected as opposed to a sudden drop. At present, there remains too much demand and too little stock, so house prices will likely remain high for some time yet.”

“The level of housing supply is 32% lower than before the pandemic and demand is up 134%.

“These latest figures suggest that the market continues to remain extremely competitive but the cost of living crisis may be a key contributor preventing home buyers and sellers coming onto the market due to financial uncertainty.

“However, slight growth in the number of properties coming to the market is being seen which is a positive shift in the right direction as a closing in the gap of supply and demand will enable house prices to start to stabilise.”

“These numbers show house prices continuing on their apparently inexorable upward path but that’s not quite what’s happening on the ground now.

“Demand is still well ahead of supply but concerns about the rising cost of living, squeezed pay packets and potentially further interest rate rises, are reducing price growth and transaction numbers.

“Looking forward, we expect activity to return to more ‘normal’ pre-pandemic conditions as supply picks up as part of the usual spring bounce.”

Whilst it is inevitable that the current growth cannot be sustained, the effect of debt erosion by inflation, combined with unprecedented demand, should prevent a drastic fall, but growth will certainly slow down towards the end of the year. It is vital that measures are taken to ensure that is is gradual slow-down and not a hard bump, otherwise we could experience a loss of confidence in the market not experienced since the early ninteies.

Posted on January 14, 2022

Inflation wiping out house price growth in many areas – claim

Soaring inflation means that house price growth in much of the country is being wiped out, according to a leading housing market analysis.

The latest monthly market report from the Home website says that only four English regions, plus Wales, show annual growth over and above the latest RPI inflation figure of 7.7 per cent for November.

Home also warns that with RPI inflation – according to some analysts – heading for 10 per cent, “some regions are treading water while others are suffering significant price falls in real terms.”

The website cautions that with cannier buyers fixing seven year mortgage deals at as low a rate as two per cent, there are hedges against the growing inflation threat – so it is not expecting any significant impact on the number of buyers in the housing market in 2022.

Home also quantifies the large gap between supply and demand.

It says agents’ inventories over the past 12 months have dropped 41 per cent – and actually 50 per cent less than in January 2019.

Supply in London is down 33 per cent year-on-year, sales stock is down 25% and prices are already up 1.3% over the last six months, making it one of the top four performing English regions.

Monthly supply of new sales listings remains comparatively low across the UK, down 18 per cent compared to the month of December 2020. Greater London shows the greatest contraction again this month.

Scarcity is also prevalent in the rental market and Home warns that it’s getting worse – the supply of rental properties is down 24 per cent on January 2021, making further rent hikes inevitable this year.