The UK economy is in a right old mess, and the housing market is suffering as a result. With rising inflation rates and falling house prices, you may be wondering where this leaves you as a borrower.
During such turbulent times, it can be difficult to work out where you stand in the market as a prospective homeowner and hopeful borrower, or as an existing homeowner looking to renew your deal. So, we’re here today to iron out a few details and create a clearer picture of how current trends in the housing market may impact you.
So, without further ado, let’s get into it.
What’s the deal with falling house prices?
Whilst 2022 saw big increases in the average property price, 2023 is hinting towards a starkly different trend.
The price of the average home in January 2023 stood at £258,297, a sharp decrease from the £281,000 average recorded last year.
Due to the Bank of England’s approval for yet another interest rate rise, further falls in figures are expected as the year ticks on.
This is due to the fact that interest rate rises tend to equal higher mortgage rates, and as mortgage rates swell, house prices usually fall. This is because the vast majority of people are less willing to borrow.
Are interest rates rising?
Put simply, yes. Interest rates have been on an upward trend for some time now.
As 2023 loomed, heads across the country were shaken in disbelief as the British public witnessed a final rise in the base rate during the month of December. As the new year rang in, we looked back upon a twelve-month period that saw interest rates rise from 0.1% to a whopping 3.5%.
Whilst analysts had predicted a potential 6% peak by the end of 2022, the bank’s attempts to suppress and control inflation rates meant that the figure did not creep beyond the 3.5% mark.
However, interest rates have risen once again as the bank struggles to control inflation during the early months of 2023.
On February 2nd, the Bank of England made the decision to increase the interest rate by another 0.5%, bringing the rate to 4%. This is the tenth time the base rate has been increased, marking the highest rate of interest the UK has seen in fifteen years.
How will this impact the mortgage market?
Borrowing costs have been on an upward trend for a while now.
Mortgage rates saw a significant jump following the Chancellor’s hardline mini-Budget in 2022, and with the continual rise in the base rate from the Bank of England, the cost of borrowing is continuing to rise.
Unsurprisingly, the number of mortgages being given the green light has thus been declining for some time. As such, it’s more important than ever to seek the professional guidance of a broker if you are looking to secure a mortgage.
I am on a fixed-rate mortgage. How will I be affected?
The seemingly unending string of base rate rises from the Bank of England has significantly impacted the cost of borrowing and the rates available to hopeful lenders.
Many homeowners on fixed-rate mortgages were cushioned from the immediate impact of interest rate rises during 2022. However, if you are due a renewal this year, you may be in for a shock, with the Office for National Statistics predicting that more than 1.4 million households are facing the prospect of interest rate rises when they come to renew their fixed-rate deals in 2023.
What about first-time buyers?
First-time buyers may actually be at an advantage here. It’s not often you hear that, right?
As housing prices continue to decrease, the chances of finding more reasonably priced homes improve as a result. As such, it may be a sound time to purchase your first home, particularly if you have a strong deposit and a stable income to keep up with your mortgage repayments.
Is there a light at the end of the tunnel?
Of course. Trends are always shifting and changing, and a downward spiral will always inevitably show signs of improvement.
Our team here at The Mortgage Brokerage are pleased to report that there is a general consensus within the mortgage market that rates will gradually decline throughout the year, even if the interest rates do continue to rise.
So from a more positive perspective, we can take stock in the fact that some lenders are slowly beginning to offer cheaper fixed-rate mortgages here and there as the year progresses. This is due to the confidence offered by the fact that the Bank of England’s base rate hikes in 2023 may not be as drastic as we had anticipated during the closing months of 2022.
Who can help me choose the right product during these uncertain times?
The economy is a mess. We can likely all agree on that front.
Given the impact that this economic instability could have on your current and future finances, it’s essential to consider all of your options before applying for a mortgage or remortgaging.
Luckily, this is not something that you need to navigate on your own. During these trying times, a professional mortgage broker can provide the guidance that you need.
With a whole-of-market vantage point, our team is ideally positioned to help you find the best deal. Our fantastic advisors here at The Mortgage Brokerage can carefully consider your personal circumstances, including current and future affordability, and identify the deals that are most suited to your situation and your financial goals.
Looking to secure a competitive mortgage but unsure where to begin? We can most certainly help. Contact us today to speak to one of our knowledgeable advisors.
