BASE RATE – Following 14 consecutive rises, the Bank of England opted to leave the Base Rate at 5.25% for the third meeting in a row.
INFLATION – The Bank of England’s decision- making is influenced by the continuing good news with regard to inflation. The latest annual rise has fallen sharply to 4% in the year to December 2023 (vs. the recent peak of 11.1% in October 2022).
However, this figure is slightly up on the 3.9% for November, and also above what some economists had expected.
Additionally, the 5.1% annual rise in ‘core inflation’ is the same as the previous month. Core inflation is the discretionary spending that the Bank of England is largely targeting with its rate rises, as it has a target inflation figure of 2%. Also, the government’s objective last January was to get inflation down to around 5% by the end of 2023.
SWAP RATES – As shown above, these have also been falling, and they influence the pricing of fixed rate mortgage deals.
PRICE WAR AMONGST LENDERS – a number of lenders have recently been reducing their mortgage deal rates. Partly, in light of the developments set out above, and also due to their desire to meet their own business targets.
(Sources: Bank of England, 14 December 2023, Office for National Statistics, CPI, 17 January 2023)
Where do we go from here?
Irrespective of what happens next, those currently coming off fixed rate deals will still see rates on offer that are much higher than the case, say, 2, 3 or 5 years ago.
Time will tell, though, if these more positive market developments are either a temporary blip, or the start of a trend. And there still remains the chance of further Base Rate rises to help tackle inflation.
Also, total mortgage lending in 2023 was about 28% lower than in 2022*. This cooling of the housing market may fuel further enthusiasm amongst some lenders to fight for market share, as they do have the funds.
(Source: *UK Finance, December 2023)
Your next step…
In short, the path forward is difficult to predict, but irrespective of whether you’re on a Fixed, Tracker or Standard Variable Rate (SVR), do talk to us if you want to (or have to) reconsider your mortgage borrowing needs.
We’re also mindful that many of those who are renting (who may want to get onto the property-owning ladder) are unlikely to escape these rising costs, as landlords may pass on their extra cost of borrowing.
Whatever your situation, we would endeavour to help make sense of the multitude of options on offer. And you can take comfort from the fact that we operate in this sector day-in day-out (and currently many, many evenings), and have the expertise to deliver suitable advice.
Plus, we can liaise with the various parties (estate agents, solicitors, surveyors, etc) to help make this process as smooth as possible for you. That’s why it’s vital that you take advice in this ever-changing marketplace. In fact, the majority of you have done just that. Back in 2022, advisers accounted for around 84% of all mortgage distribution, and that’s expected to rise to 89% in 2024.
(Source: IMLA, December 2023 release)
Property prices
The other consideration is the general value of the property you’re borrowing against. There was a 1.8% annual decline in the average house price over the course of 2023.
What is clear though, for homeowners, is that price rises over time may help to offset any fall. For example, in the last two years alone (within a difficult economic climate), the average property price has still risen by over £6,000 – equating to about a 2% increase in value.
Also, prices over the long-term have been incredibly resilient, and in the last 30 years, for instance, we have seen the average property price rise from around £51,000 in Q4 1993, to about £259,000 in Q4 2023. That’s a fivefold increase.
(Source: Nationwide, House Price Index, Dec ‘23 & Q4 ‘23)
With so much to consider, it can all be quite confusing, and that’s why you
should talk to us.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Mortgage Calculator
Monthly payments for a mortgage per £1,000 borrowed over 30 years
Interest rate £ Interest-only* £ Repayment
%
0.25 0.21 2.88
0.50 0.42 2.99
1.00 0.83 3.22
1.50 1.25 3.45
2.00 1.67 3.70
2.50 2.08 3.95
3.00 2.50 4.22
3.50 2.92 4.49
4.00 3.33 4.77
4.50 3.75 5.07
5.00 4.17 5.37
5.50 4.58 5.68
6.00 5.00 6.00
6.50 5.42 6.32
7.00 5.83 6.65
7.50 6.25 6.99
8.00 6.67 7.34
8.50 7.08 7.69
9.00 7.50 8.05
9.50 7.92 8.41
10.00 8.33 8.78
Here’s how to use the mortgage payments calculator: A £100,000 mortgage over
30 years, charged at a 5% interest rate would cost 100 x £5.37 (for Repayment)
= £537 per month.
* Excludes any payments to a separate savings scheme, to help pay off the capital amount borrowed.
This calculator only provides a guide to monthly payments and does not guarantee eligibility for a mortgage. The actual amounts that you may have to pay may be more or less than the figures shown. Please contact us for a personalised illustration.
copyright: Bluestone Publishing Ltd 2024