Will the Bank of England raise interest rates again this year?

         Will the Bank of England raise interest rates again this year?

 

  •          Bank of England held the base rate at 5.25% after a surprise drop in inflation
  •          Some economists believe interest rates have now peaked

The Bank of England has pressed pause on its rate hiking cycle, signalling its job might nearly be done after a surprise fall in the headline inflation rate. The Monetary Policy Committee voted to hold rates at 5.25 per cent, the first pause in nearly two years. Earlier this week, markets were confident the central bank would raise rates, but a cooler-than-expected inflation reading prompted speculation we could be near the end of the hiking cycle. The decision brings the BoE in line with its peers the ECB and the Federal Reserve, which held rates in its meeting on Wednesday but did not rule out further rises.

Today’s decision signifies the BoE could be nearing the end of its tightening cycle. So have we reached the peak, or could we be in store for further rate rises?

 

Why did the Bank of England hold the base rate?

 Even before today’s decision, the Monetary Policy Committee had indicated we could be nearing the peak of the rate hiking cycle. Earlier this month, Andrew Bailey told the Treasury Select Committee: ‘I think we are much nearer now to the top of the cycle.’ He also expressed concern that if the bank hikes too far, then it might need to cut too quickly.

The MPC was split, with five members voting to hold rates while the remaining four voted to raise the base rate to 5.5 per cent. August’s inflation reading seems to have been the decisive factor in holding rates at 5.25 per cent, although the members who voted to hold also pointed to signs that the labour market is loosening. The majority judged that the greater risk is overtightening, before the full effect of previous interest rates has filtered through.

The MPC’s report, published alongside the base rate decision, said: ‘For most members within this group, the latest developments meant that the judgment to keep bank rate unchanged at this meeting rather than increase it was finely balanced.’

‘Given the significant increase in bank rate since the start of this tightening cycle, the current monetary policy stance was restrictive.

‘This meant that the decision on whether to increase or to maintain bank rate at this meeting had become more finely balanced between the risks of not tightening policy enough when underlying inflationary pressures could still prove persistent, and not placing sufficient weight on the impact of the previous tightening that was still to come through on activity and inflation.’

When the bank raises its rate, it can take up to two years for it to have a full effect on the economy. According to the committee, this lag in policy meant that ‘sizeable impacts from past increases were still to come through.’

Could there be another base rate rise this year?

The BoE’s neutral language and references to a ‘finely balanced’ decision suggest it won’t be a hard stop for interest rate rises just yet.

In his letter to the Chancellor, Andrew Bailey said: ‘There is absolutely no room for complacency. I can assure you that the MPC will stay the course and keep monetary policy sufficiently restrictive for sufficiently long to return inflation to the 2 per cent target in the medium term.’ Inflation still remains three times the level of the Bank’s long-term two per cent inflation target. The near-even split of its committee members in itself suggests another pause in November is not a given. The monetary policy lag means the Bank could be taking a ‘wait and see’ approach to see how previous rate rises have filtered through to the economy before the end of the year. It will also be looking at September and October’s inflation readings. Should core inflation start to rise again, it may take the decision to increase the base rate. The Bank said: ‘CPI inflation is expected to fall significantly further in the near term, reflecting lower annual energy inflation, despite the renewed upward pressure from oil prices, and further declines in food and core goods price inflation.

‘Services price inflation, however, is projected to remain elevated in the near term, with some potential month-to-month volatility.’

Bailey added: ‘Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2 per cent target sustainably in the medium term. Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.’

Paul Dales, chief UK economist at Capital Economics thinks this careful language is about the Bank wanting the markets to believe in the ‘high for long’ narrative.

‘The Bank doesn’t want the markets to conclude that a peak in rates will be quickly followed by a pivot to rate cuts, which would loosen financial conditions and undermine its attempts to quash inflation.

‘The language also gives the Bank the flexibility to respond to new developments.’

While the Bank may not be giving much away, some analysts believe that this will be the last rate hike in this cycle.

Both Dales and Samuel Tombs, chief UK economist at Pantheon Macroeconomics, believe interest rates have peaked at 5.25 per cent, rather than previous forecasts of 5.5 per cent.

‘With surveys pointing to a further increase in labour market slack, a slight slowdown in wage growth and lower CPI inflation by year-end, the case for hiking again likely won’t be stronger in November or December than today,’ said Tombs.

‘Accordingly, we now think that 5.25 per cent will be the peak level of bank rate in this hiking cycle.’

Dales said: ‘We think rates will stay at this peak of 5.25 per cent for longer than the Fed, the ECB and investors expect, but that when rates are cut in late 2024 they will be reduced further and faster than widely expected.’

By ANGHARAD CARRICK

21 September 2023

Has the base rate peaked at 5.25%?

The Bank of England (BoE) has raised the base rate to 5.25 per cent, the highest level seen since 2008 and the hike will pile more pressure onto borrowers who are already facing huge price rises amid the cost of living crisis.

But the question everyone is asking now is when will they start falling?

Markets have started to price in a lower peak for borrowing costs after the Bank of England signalled that the cycle of interest rate increases could be nearing an end.

Despite the 14th consecutive rate rise since late 2021, traders seized on signs that the top of the rate cycle may be closer than previously expected. Markets are now pricing in a peak of about 5.75 per cent, having previously bet on rates rising above 6 per cent.

It came as the Bank signalled that rates will need to stay higher for longer to push inflation, which stood at 7.9 per cent in June, towards the Bank’s target of 2 per cent.

In a closely-watched change of wording, the Bank’s monetary policy committee said it would ensure that the base rate “is sufficiently restrictive for sufficiently long to return inflation to the 2 per cent target sustainably in the medium term”, suggesting that borrowing costs could remain above 5 per cent into 2025.

Andrew Bailey, governor of the Bank of England, said that “in order to get inflation back to target we are going to have to, in a sense, keep this stance of policy”. Bailey also signalled that the peak for borrowing costs may not be far off. The governor emphasised that “there is more than one path from here that delivers us back to the target”.

This could include the base rate remaining at 5.25 per cent.

The monetary policy committee was split three ways over what to do with borrowing costs this month. Six members, including Bailey, voted for a 0.25 percentage point rise while two members, Jonathan Haskel and Catherine Mann, were in favour of a bigger 0.5 percentage point increase. Swati Dhingra voted for the rate to be kept at 5 per cent.

Bailey is under significant pressure to bring down inflation, which hit a 41-year high of 11.1 per cent in October. While inflation has remained stubbornly high so far this year, a bigger than expected fall in June has raised hopes that the cycle of rate rises is having an effect. Bailey said: “The stance of monetary policy is restrictive, in our view. The evidence is now clear that it is having an impact.”

Economists at Nomura said the Bank’s description of its policy as “restrictive” suggested “on one interpretation at least, that we are approaching the end of the hiking cycle”.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, also said that although further rate rises were likely, “the peak level” for the base rate “is near”.

Source: Ben Martin, The Times (Friday August 04 2023)

WHAT IS THE MORTGAGE CHARTER?

The charter is intended to help millions of homeowners who are facing a huge jump in monthly mortgage repayments because of rising interest rates after the Bank of England upped rates to 5% last month

The help comes through the “Mortgage Charter” which is a set of measures the majority of mortgage lenders have signed up to.

The charter – agreed between the Government, principal mortgage lenders and the Financial Conduct Authority (FCA) – has been signed by over 40 lenders including Barclays, Nat West, Lloyds, Halifax and many others.

However, you should be aware that this particular mortgage support does not cover those with a buy-to-let mortgage.

Firstly, from July 10th, mortgage holders can switch their mortgage deal to an interest-only plan for up to six months.

This will temporarily bring down the monthly payments and they can switch back to their original deal with no impact to their credit score.

Mortgage holders will also be able to extend the length of their term.

As well as this, customers approaching the end of a fixed-rate deal will have the chance to lock in a new deal up to six months ahead.

They will also be able to manage their new deal and request a better like-for-like deal with their lender right up until their new term starts if one is available.

This means if you lock in a rate now in July, that rate will be honoured until your mortgage renews in January.

If a new deal comes and it’s better than the one you have locked in then you will be able to switch to it with no issue.

While this has often been offered by some lenders in the past, it is now a firm commitment from lenders signed up to the charter.

Of course, switching the terms of your mortgage can have impacts on how much you end up paying overall – so always speak to a mortgage broker first before making any big decisions.

For example, switching to interest-only reduces your monthly repayments but does mean you don’t actually pay off the capital you own.

Extending the length of your mortgage means you’ll take longer to pay it off and you’ll likely pay more interest over time.

Alongside this, lenders will need to provide “well-timed information” to help customers plan ahead when their current rate is due to end.

Some elements of the charter came into effect last month with borrowers not allowed to have their homes repossessed within 12 months of their first missed mortgage payment.

Homeowners can also approach their lenders for advice on repayments without impacting their credit score.

You should also be aware that you’ll need to be up to date with your repayments to be eligible for the help, as it doesn’t apply to those who have already fallen behind on their mortgage payments.

What to do if you need a mortgage

Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.

What if I need to remortgage?

Anyone with a fixed rate deal ending within the next six, should look into how much it would cost them to remortgage now – and consider locking into a new deal.

Most mortgage deals allow fees to be added to the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I am buying a home?

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.

Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to  higher mortgage rates limiting people’s borrowing ability.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to speak us.

You can use our best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to us as soon as possible, so we can help you find the right mortgage for you.

Source:Ruby Flanagan – Money Reporter

Fran Evans – This is Money

Five Reasons Not To Panic About Your Mortgage

It’s not a great time for mortgage holders. The Bank of England raised the base rate by 0.5 percentage points to 5 per cent last week, and the core inflation figures recently published suggest the economic troubles aren’t going away quickly.

So if you’re feeling worried about your mortgage right now, you’re not alone. There are things that can be done, however, so here are five practical suggestions to help ease the panic.

You can extend your mortgage term

If you extend your mortgage term, it will lower your monthly repayments. The downside of this strategy is that you will have a mortgage to pay for a longer period of time, and that could cost you more in interest.

On the other hand, if interest rates come down at any point over the next few years, you may be able to remortgage onto a lower rate at that point. Potentially, if your financial circumstances have improved sufficiently by then, you could look at reducing your term back down again.

You can book a new rate six months ahead

If your current cheap deal is coming to an end this year and you are worried about rates rising further, you can lock in a new fixed rate deal now. This is because most mortgage deals can be booked six months in advance.

The good news is that, if between now and your current deal coming to an end rates do start to come down, you can change your mind about which deal you want to remortgage to. So you’ll get peace of mind now, knowing you’ve got a fixed rate that protects you against further rises. But equally, if rates do start to come down, you can look to change the product you’ve booked if a better deal does appear.

You can shop around for the cheapest deal

Although the average two-year fixed rate is 6.15 per cent and the average five-year fixed rate is 5.79 per cent, you may be able to find a market-leading fixed rate for 5 per cent or less, if you speak to a broker. This is particularly the case if your loan-to-value (LTV) – which is essentially the proportion of the overall cost of the property that the bank is lending on – is 60 per cent or less.

Even if your LTV was high (for example 90 per cent, meaning your deposit is 10 per cent) the last time you borrowed against your home, recent increases in house prices could mean that you will qualify for a more competitive deal when you come to remortgage.

It is particularly important to shop around for a cheaper deal if you have moved on to your lender’s standard variable rate (SVR), as most SVRs are usually at least two percentage points higher than the best buys available on the market.

You can plan ahead – and prepare

If you are still on a super low fixed rate, make the most of it either by putting money aside each month or possibly even overpaying the mortgage. That will put you in a better position when you do come to switch. Getting into the habit of allocating more of your monthly spend to your mortgage now will mean you do not have such a big shock when your current deal ends, and that will give you peace of mind. And if you put that money in a competitive savings account, you might even earn more interest on it than you’re paying on your mortgage.

You can ask to temporarily switch to interest-only

One of the easiest ways to cut your monthly mortgage payments is to ask your lender if you can temporarily switch from a repayment mortgage to an interest-only mortgage for six to 12 months. This strategy will cost you more in the end – and as you are no longer paying off your debt, you will move no closer to owning your home. But, as a temporary measure, it can be helpful as a way of significantly reducing your monthly outgoings.

Such a strategy should be considered a last resort. You will end up paying more in the end, but that may be better than struggling and bankrupting yourself now.

Lenders will typically only allow you to do this switch on a temporary basis, for example for six to 12 months. During this period, you may be able to increase your income, for example by getting a higher paid job, or you may decide to sell up and downsize so that you can afford to switch back to a repayment mortgage on your home. The good thing is, taking this step won’t affect your credit file, as long as you make your payments on time.

Source: Donna Ferguson of inews 25th June 2023

 

All You Need To Know About The Renters Reform Bill

The Government have set forward their Renters Reform Bill, which is now making its way through the Parliamentary process, with aims to be law by the end of 2023.

We’ve summarised the key proposals that will debated in the House of Lords and House of Commons. Continue reading to stay up to date.

Tenancy Reform 

  • Fixed-term tenancies are ending and being replaced by periodic tenancies that don’t have an end date. Tenants will be able to leave the tenancy by giving two months’ notice
  • Rent increases limited to one increase per year, a form must be completed by the landlord and served to the tenant with two months’ notice

End Of No-Fault Evictions 

  • Under the new legislation, section 21 ‘no fault evictions’ will be abolished
  • Landlords will only be able to evict tenants under certain circumstances under section 8 grounds

Private Rented Sector Ombudsman Portal 

  • This independent body will oversee dispute resolutions, providing a fair and impartial platform for tenants and landlords alike
  • Membership for landlords will be mandatory

Private Rental Property Portal  

  • Landlords will be legally required to register themselves and their properties on a new property portal, created to help facilitate communications with tenants

Renting With Pets  

  • Tenants will now have a legal right to request permission to keep pets in their rented homes. Landlords must consider these requests and cannot unreasonably refuse them.​​​​​​

Additional Measures 

  • No blanket bans on renting to benefit claimants or families with children allowed

Applying the Decent Homes Standard to the PRS for the first time, ensuring that rented properties meet minimum quality requirements.

What’s Next?

We’ll keep you informed as the Bill makes its way through Parliament.

If you find that landlords require extra support, there is additional information on the government website and general PRS information on our blog.

Source: Paragon 30th May 2023

 

SKIPTON LAUNCHES DEPOSIT FREE 100% MORTGAGE

Skipton Building Society has unveiled details of the first 100% loan-to-value mortgage launched since the 2008 financial crisis.

 Aimed at renters, the lender’s Track Record Mortgage aims to help tenants onto the property ladder without a house deposit and removing the dependency on the Bank of Mum and Dad or guarantors.

How does it work?

This deposit-free 100% mortgage enables first-time buyers to purchase a home by providing evidence that they have made rental payments for at least 12 months. Usually, a deposit between 5% and 10% is required for a buyer to apply for a mortgage, but renters often struggle to save for a deposit while paying rent.

This new product is exclusively available through Skipton Building Society on house purchases and will allow borrowers to side-step the usual deposit requirements, enabling renters to buy a home with a 100% mortgage.

Who can apply for this mortgage?

You might be eligible for this mortgage if:

Each applicant must be a first-time buyer aged 21 or over.

  • Applicants cannot have any missed payments on debts or credit commitments like mobile phones within the last six months.
  • They are not looking to buy a new build flat.
  • Borrowers will need proof of having paid rent for at least 12 months in a row within the last 18 months.
  • They have 12 months of experience paying all household bills within the previous 18 months.

Important points to consider before applying!

You need to make sure you’re aware of what it means to have a zero or minimal deposit mortgage, as there is a higher risk of negative equity. You would be in negative equity if you owe more on your mortgage than what your home is worth.

You could lose your home if you don’t keep up your mortgage repayments.

Want to take the next Step?

 At Concise we will help you through the process step by step working out how much you can borrow, how much it will cost, and what type of mortgage may be most suitable for you. We will even take care of all the paperwork for you, so you don’t need to worry about a thing.

For further information on the Track Record mortgage or to make an appointment please contact us at enquiries@concisefs.co.uk or on 01522 567222.

The information contained within was correct at the time of publication but is subject to change.

Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage

UK House Prices In Surprise Rise In April, Says Nationwide

UK House Prices In Surprise Rise In April, Says Nationwide

UK house prices rose by 0.5% in April after seven consecutive months of falls, according to the Nationwide building society.

Economists had been expecting average prices to decrease during the month. Prices had been falling since August last year, after Liz Truss’s mini-budget sparked turmoil on financial markets and drove up borrowing costs.

Nationwide is predicting a “modest recovery” in the housing market as mortgage rates start to come down. But it said any improvement would be “fairly pedestrian”, as household finances remain under pressure and average earnings have been failing to keep pace with inflation.

The cost of an average home rose by 0.5% between March and April to hit £260,441, said the lender, which bases the findings on its mortgage data. However, that was still 2.7% lower than a year ago. Conditions in the housing market have “taken a while to settle down” since the mini-budget, the lender said.

In September, former chancellor Kwasi Kwarteng promised billions of pounds of tax cuts without explaining how they would be paid for. It spooked financial markets and drove mortgage rates up to a 14-year high.

Rates are now “well below” those levels, but remain more than twice what they were a year ago, Nationwide said. However, the number of mortgages being approved is picking up and households feel more confident about their finances, said Robert Gardner, Nationwide’s chief economist.

“If inflation falls sharply in the second half of the year, as most analysts expect, this would likely further bolster sentiment,” Mr Gardener said.

“This, in turn, would also be likely to support a modest recovery in housing market activity.”

Rising prices will be a blow to potential first-time buyers, who are already facing rising rents. The continuing rise in many regular bills and food prices is also adding to the financial strain. However, views among housing market analysts are mixed, with some suggesting that house prices are not guaranteed to rise.

Samuel Mather-Holgate, from advisory firm Mather and Murray Financial, said: “The housing market always sees a boost in the spring, but don’t confuse this data with the green shoots of recovery.

“The annual figure is still down, and this is expected to get worse over the next few months, especially if the central bank increases rates again this month.”

But Tomer Aboody, director of property lender MT Finance, said: “Buyers are finally making their move after months of waiting and stalling. More transactions are definitely needed for the overall strength of the housing market.”

Source: BBC News 03/05/2023

MAJOR LENDERS CUT MORTGAGE INTEREST RATES: IS THIS THE START OF A ‘PRICE WAR’?

  • Santander and Barclays latest lenders to reduce rates
  • Nationwide has reduced mortgage rates by up to 0.20% 
  • Halifax’s reductions apply to mortgages arranged via brokers
  • Average rates on fixed mortgages have continued to fall since November

Major mortgage lenders are reducing their rates, as the average cost of a fixed rate mortgage continues to fall from the highs seen last year.

Nationwide has reduced interest rates across its mortgage range by up to 0.2 per cent, with the cheapest fixed deal now at 4.34 per cent.

The price cuts include low-deposit mortgages, aimed at first time buyers, as well as remortgage products.

A five-year fixed rate on a 10 per cent deposit mortgage is now 4.79 per cent, with a £999 fee – a reduction of 0.1 per cent.

There is also a five-year fixed rate on a 40 per cent deposit mortgage at 4.34 per cent, reduced by 0.09 per cent. It also comes with a £999 fee.

Tracker rates have also come down by up to 0.2 per cent, on two, three and five year initial terms. A two-year tracker rate on a 40 per cent deposit is now 3.79 per cent with a £999 fee, reduced by 0.20 per cent.

This will hopefully trigger a new price war in the mortgage market, and about time too 

Will mortgage rates go below 4%? 

 Mortgage rates rose rapidly at the end of last year, thanks to uncertain economic conditions in the UK and the fallout from the disastrous mini-Budget in September, but they are now slowly falling. Interest on the average five-year fixed mortgage has dropped well below 6 per cent to 5.42 per cent, as more lenders reduce their rates. Two-year fixed rate deals are now at an average of 5.6 per cent, according to Moneyfacts. But the best deals available now are heading towards 4 per cent, with rates as low as 4.04 per cent on a 10-year fix for those with large deposits.

Halifax has also announced rate reductions across its product range for intermediaries. These are rates which are only available to those who go through a broker, rather than directly to the lender.  The reductions have been applied to fixed rates for home buyers including first time buyers and affordable housing schemes including shared ownership, as well as its range of green home products.

What to do if you need a mortgage?

 Borrowers who need to find a mortgage because their current fixed rate deal is coming to an end, or because they have agreed a house purchase, should explore their options as soon as possible.

 What if I need to remortgage? 

Borrowers should compare rates and speak to a mortgage broker and be prepared to act to secure a rate. Anyone with a fixed rate deal ending within the next six to nine months, should look into how much it would cost them to remortgage now – and consider locking into a new deal.

Most mortgage deals allow fees to be added the loan and they are then only charged when it is taken out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.

What if I am buying a home? 

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.

Home buyers should beware overstretching themselves and be prepared for the possibility that house prices may fall from their current high levels, due to  higher mortgage rates limiting people’s borrowing ability.

How to compare mortgage costs 

The best way to compare mortgage costs and find the right deal for you is to speak to a good broker. Be aware that rates can change quickly, however, and so the advice is that if you need a mortgage to compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you.

By Fran Ivens For This Is Money

 

4 Signs The UK Housing Market Will Hold Up Despite High Mortgage Rates

New sales activity in the housing market is holding up in the last week. High mortgage rates do not hit all buyers equally and I remain hopeful that borrowing costs will be lower as we start 2023.

 Key Takeaways

  • It’s early days, but I remain optimistic that mortgage rates will be lower as we start 2023
  • There are minimal chances of negative equity after strong post-pandemic price growth
  • Sales are still being agreed in the last 2 weeks as those keen to move and with cheap mortgages in place continue with sales
  • Higher mortgage rates do not hit everyone: 30% of sales are with cash and a further 20% are with smaller-sized mortgages
  • For now, it’s like Christmas has come early for the housing market with lower activity from new buyers in the aftermath of the mini-budget.

1. I’m Hopeful Mortgage Rates Will Start To Fall Back Soon

This week’s reversal of tax cuts announced in the mini budget seems to have calmed the markets. Borrowing costs are starting to fall for government debt and the all-important interest rates that set the cost of a fixed-rate mortgage.

Mortgage rates for new borrowers remain over 6% but I believe there are very early signs that this could start to fall back further in the weeks ahead.

This is important as the outlook for the UK housing market next year really hinges on the level of mortgage rates for buyers entering the market from January 2023 onwards.

Our analysis has always suggested that mortgage rates of 4% were manageable for most buyers. Rates reaching 5% or higher would be more of a tipping point with the likelihood of some localised price falls and fewer sales.

Looking ahead, what really matters now is the outlook for inflation – in particular, how much more central banks need to increase the Bank Rate to bring inflation under control in the UK. We will know more in the next 2 weeks.

As soon as we get signs that inflation is starting to peak, the financial markets should start to take a very different outlook on borrowing costs. This will start to reduce the cost of 5-year mortgage rates which account for more than 60% of all new loans.

It’s early days, but I remain optimistic that mortgage rates will be lower than they currently are as we enter 2023.

However, home buyers need to realise that sub-2% mortgage rates are a thing of the past, enabled by cheap money over the last decade. 4% is likely to be the new normal for mortgage rates.

2. There Are Minimal Chances Of Negative Equity

Strong UK-wide house price growth over the pandemic has added to the equity buffer for homeowners. New borrowers have not relied on large mortgages to pay more for homes.

There is a huge equity buffer to absorb any reductions in sale price, and this will allow for the hit to buying power for new home buyers.

Find out how much your home is worth

We calculate that a nationwide 15% reduction in house prices from today’s levels would result in very few cases of negative equity for mortgaged sales up to the end of 2021.

This highlights how the UK housing market has become increasingly equity driven and is much less dependent on high loan-to-value (LTV) borrowing over 90%.

3. New sales are still being agreed despite uncertainty

 Looking back over the last week’s activity from homebuyers on Zoopla, we see that interest from new buyers continues to weaken – it’s down a further 8%. Those who haven’t managed to arrange cheaper mortgages are stepping back from the market, creating a sense that the Christmas seasonal slowdown has started early.

However, sellers and buyers continue to agree new sales across the UK. The rate at which new sales are being agreed is slowing – down 25% on this time last year – but sales have not stalled. This shows that there are committed buyers in the market who want to press on and secure a sale.

Mortgage rates are important for many buyers, but life-related decisions and other pressures will continue to bring a flow of buyers and sellers into the market. However, this is and will be at a slower pace than earlier in 2022.

4. 30% Of Sales Are Cash Buyers

Higher mortgage rates are deterring buyers who need a large mortgage to buy a home. But not everyone needs a large mortgage.

3 in every 10 home sales in the UK were paid for in cash last year. A further 20% of buyers use smaller-sized mortgages, and the increase in borrowing costs will be much smaller and less of a disincentive to move for them.

Cash buyers account for almost 40% of sales in the South West. But in London where prices are highest, less than 1 in 5 sales are paid for without a mortgage.

We have seen the proportion of cash buyers increase over the pandemic with more moves by older homeowners and those who have paid off their mortgage. Over half of all homeowners don’t have a mortgage at all.

However, most people buying a home do rely on a mortgage so the increase in rates is important for the UK housing market outlook.

By Richard Donnell of Zoopla

October 2022

Interest Rates Raised Again

The Bank of England has voted to hike interest rates by 0.5 percentage points to 2.25% - the seventh rise since last December. How will this impact mortgage holders?

For the 2.2 million people on a variable rate mortgage, the rise is very bad news, leaving many having to pay hundreds of pounds extra a year.

If you have a fixed-rate mortgage, you won’t see any immediate change to your monthly repayments. However, when your current deal ends, you’ll likely end up paying more on a new deal.

We have our finger on the pulse and can help you navigate the changing economic environment – get in touch today!

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments

Sources:
Guardian