Mixed Mortgage Signals This Summer
As we head into summer, the weather is certainly starting to hot up. Will
the housing and mortgage markets do the same?
On the one hand, the total number of residential mortgage products has risen
above 5,000 for the first time since May 2022, a sign that certainty is much
stronger in the mortgage market than it was in the months after the
government’s ‘mini-budget’ in August 2022.
Likewise, agreed sales recorded its least negative reading since July 2022 in the
May Residential Market Survey from the Royal Institution of Chartered Surveyors
(RICS).
Prices still to fall?
On the other hand, house price growth dipped in April following a strong showing
in March, which put a stop to three consecutive months of growth. It remains to
be seen which way the market will veer in the second half of 2023, but analysts
are still predicting a fall towards the end of the year.
If, as many are predicting, a flurry of mortgaged homeowners are forced to sell
up when their current fixed-term deals ends, the market could see a boost to
supply that might reinforce the downward price movement. Analysts suggest
that first-time buyers (FTBs) could be delaying their homebuying plans in the
hope that mortgage rates or house prices are about to fall sharply.
Bank Rate rises again
Meanwhile, the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) is
continuing to increase Bank Rate, with the latest quarter of a percentage point
rise in May taking it to 4.5%. Various mortgage lenders increased the rates of
new deals towards the end of May, following release of the higher-than-expected
inflation figures. Nationwide was one such lender, increasing rates on new fixed
rate borrowing by up to 0.45 percentage points. A Nationwide spokesperson said
of the increase, ”In the current economic environment… this will ensure our
mortgage rates remain sustainable.” Other major lenders also upped their rates
last week. Borrowing costs are now at their highest level since October 2008.
In addition to product rate increases, fewer mortgages are on the market, with
some lenders choosing to withdraw products.
Those with tracker or variable rates have seen immediate higher repayments but
the impact on fixed-rate deals has been less pronounced, with several lenders
leaving rates unchanged. With inflation still running at 8.7% in May, according to
the latest official figures released by the Office for National Statistics (ONS),
experts are predicting that Bank Rate could be increased again in June.
Whatever happens
After a turbulent year, uncertainty remains in the housing and mortgage
markets. Whatever your position – and whatever happens in the months ahead –
we’ll be here to help and advise.
Your home may be repossessed if you do not keep up repayments on
your mortgage.