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Hope for homebuyers as rates fall on UK fixed mortgage deals

Borrowers received a glimmer of good news after average rates on new two- and five-year fixed mortgages fell for the first time since May.

News of the small falls came 24 hours after it was announced that UK inflation fell further than expected in June, which immediately prompted speculation that the Bank of England would not raise interest rates by as much as previously expected. The pricing of fixed-rate mortgage deals is closely tied to expectations of future interest rate rises.

Moneyfacts, the financial data provider, said the average rate on a new fixed-rate deal lasting for two years was now 6.79% – down from 6.81% on Wednesday. Meanwhile, the typical rate on a new five-year fix nudged down to 6.31%, from 6.33% a day earlier.

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The seemingly unrelenting rise in the cost of new deals has been piling pressure on would-be homebuyers and those whose fixed-term deals are expiring, and the new data will inevitably raise hopes in some quarters that new fixed rates may have peaked. However, it is too early to say whether these small falls are the start of a trend or merely a blip.

Fixed-rate mortgage pricing has been on a rollercoaster ride in recent months: the average new two-year fixed rate was priced at about 4.75% in late September last year, but by the start of November it had climbed to 6.47%. In the months that followed, rates gradually fell back as markets stabilised, until they were spooked once again by a smaller than expected drop in the UK inflation rate at the end of May. They then resumed their upwards march, and the average two-year rate has been edging closer to 7%.

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Wednesday’s official data revealed that the UK inflation rate eased to 7.9% in June. If the rate had stayed above 8%, some economists had suggested the Bank of England may have opted for another half-point increase in interest rates next month from the current level of 5%. However, they are now betting that a quarter-point rise is more likely.

Nicholas Mendes​, mortgage technical manager at broker John Charcol, said on Wednesday: “It will take a few months before we see any substantial decreases in fixed-rate pricing.”

However, Lewis Shaw, founder of broker Shaw Financial Services, said: “I’m going out on a limb here to say fixed mortgage rates have peaked. We may see a little shuffling around, but the continued painful increases are over.”

By Rupert Jones

Source: The Guardian

house prices
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Home sellers are still raising asking prices despite mortgage crunch

Optimistic home sellers have continued to raise asking prices this year, despite the rate crunch that has added hundreds of pounds to monthly mortgage bills.

Property listing giant Rightmove said although asking prices rose annually at the slowest pace since the end of 2019, they were still going up.

The average price of newly-listed homes coming to market rose by 0.5 per cent, to £371,907, in the year to July – and is up 2.6 per cent since the start of the year.

But many sellers are proving to be overly confident as there has been a rise in the number of properties seeing asking prices cut after they initially go on the market and fail to sell.

Buyers have been forced to lower their expectations amid rising mortgage rates that have added hundreds of pounds to the monthly cost of buying the same priced property as last year.

The hardest hit areas are those were house prices are highest and buyers most stretched.

Rightmove said prices have proved more resilient than expected, but that surging mortgage rates were now beginning to weigh on the property market.

‘While prices and sales bounced back this year much more strongly than most expected, the unexpectedly stubborn inflation figures and the surprise of further mortgage rate rises when many felt that they had stabilised, have contributed to the fall in prices and number of sales agreed,’ said Rightmove’s director, Tim Bannister.

‘The interest-rate brakes being applied more strongly to slow the economy are now beginning to bite in the housing market.’

Rightmove said that asking prices fell slightly, by 0.2 per cent, on a monthly basis, compared to zero growth in June and this was marginally below the usual stagnation seen at this time of year.

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Rightmove’s comments echo the latest survey by the Royal Institution of Chartered Surveyors, which found that buyer interest, sales and property prices suffered in June as mortgage rates continued to rise.

June saw new buyer enquiries reach an eight-month low, pointing to a ‘renewed deterioration’ in the UK sales market, the Rics said.

Meanwhile, Britain’s biggest mortgage lender Halifax revealed that house prices fell at their fastest rate in 12 years this month, dropping £7,500 on average over the past year.

Rightmove’s report shows sales agreed are now 12 per cent behind 2019’s more normal market level, contrasting with the surprisingly strong first five months of the year.

However, buyer demand has remained resilient, rising 3 per cent compared to the same period in 2019.

Rightmove said that estate agents are reporting that right-priced homes are still attracting buyers due to the shortage of property for sale compared to historic norms.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Bannister said: ‘First-time buyers, trader-uppers and downsizers with higher deposits and lower mortgage requirements appear to be still keenly searching the market, not wanting to miss out on the right property that is not over-priced and that they can still afford.’

Bigger homes have proved harder to shift, with agreed sales for second-stepper homes and top-of-the-ladder homes some 14 per cent behind last yea cr.

In comparison, sales for smaller two-bed homes fared better, falling by a smaller 9 per cent.

‘The continuing twists and turns of persistent inflation and higher mortgage rates have posed some additional challenges for the market,’ Bannister said.

‘Agents report that some movers are pausing until there is more certainty that mortgage rates have stabilised, as well as reviewing how higher costs affect their plans.’

On a regional basis, London, the East and South East were the only regions to see prices fall compared to last year, with falls between 0.4 per cent and 0.6 per cent.

The fastest annual growth was in Scotland, where average asking prices surged by 3.6 per cent, followed by Yorkshire and the Humber with 2.1 per cent growth.

By Camilla Canocchi

Source: This is Money

car finance
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Consumer car finance new business volumes fell by 10% in May 2023

New figures released by the Finance & Leasing Association (FLA) show that consumer car finance new business volumes fell in May 2023 by 10% compared with the same month in 2022. The corresponding value of new business also fell by 10% over the same period.

In the five months to May 2023, new business fell 9% by value and 8% by volume compared with the same period in 2022.

The consumer new car finance market reported a fall in new business in May of 8% by value and 9% by volume compared with the same month in 2022. In the five months to May 2023, new business volumes in this market were 9% lower than in the same period in 2022.

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The consumer used car finance market reported a fall in new business in May of 11% by value and 10% by volume compared with the same month in 2022. In the five months to May 2023, new business volumes in this market were 7% lower than in the same period in 2022.

Commenting on the figures, Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, said: “May saw the continuation of recent trends with a strong performance in the business new car finance market offset by lower levels of new business in both the consumer new and used car finance markets.

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“The industry remains cautiously optimistic about the prospects for future growth, with three-quarters of motor finance respondents to the FLA’s Q2 2023 Industry Outlook Survey anticipating some increase in new business over the next year.”

By Lisa Laverick

Source: Asset Finance International

UK properties
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UK Mortgage Rates Reaches 15-Year High as Housing Market Slows

Matthew Ryan, head of market strategy at global financial services firm Ebury, anticipates that the central bank will hike interest rates to around 6.35% within the first three months of next year.

Mortgage rates in the United Kingdom have reached a 15-year high, adding pressure on homeowners and slowing the housing market. According to data from Moneyfacts, the average two-year fixed rate for residential mortgages has now peaked at 6.66%, a little increase from the 6.63% it recorded on Monday, July 10. Last year on October 20, the mortgage rates were at 6.65%. However, the new rates represent the highest level homeowners in the UK have seen since August 2008, during the global financial crisis, bringing mortgage costs to their highest levels for nearly two decades.

UK Housing Market Attempted a Comeback Early This Year

The country’s housing market has been on a roller coaster ride recently. After a turbulent start to the year, the market began to recover in early 2023. However, the recovery has been short-lived, as homeowners and buyers have recently faced renewed mortgage pain.

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The rise in mortgage rates in the UK is driven by several factors, including rising inflation and expectations that the Bank of England (BoE) will continue to raise interest rates to bring inflation under control. The BoE has expanded its base rate many times since December, and the central bank is still expected to increase the rates further to keep inflation under control.

Last month, the BoE hiked its base rate to 5%. The new rate marked its highest level in 13 years. Economists believe the base rate could rise to as high as 6% by the end of the year. The rate increment has caused mortgage rates to surge, making it more expensive for people to borrow money to buy a home. As a result, house prices have begun to fall, and the number of mortgage approvals has declined.

Experts Warn of Further Pain for Mortgage Holders in the UK

According to reports, experts are warning that the rising cost of mortgages could significantly impact mortgage holders. Danni Hewson, head of financial analysis at AJ Bell, an investment and stock broker company, said on Tuesday:

“Mortgage payers are marching towards fixed rate renewal dates with a sense of dread.”

She believes that the mood in the market is changing and that bad news is becoming more commonplace.

Another expert, Matthew Ryan, head of market strategy at global financial services firm Ebury, anticipates that the central bank will hike interest rates to around 6.35% within the first three months of next year.

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“Financial markets are pricing in a peak in UK interest rates of around 6.35% in the first three months of 2024, up from 5% currently,” he said.

Ryan also warned that this could have a massive impact on mortgage holders, as they will see their monthly payments increase.

What Does This Mean for Homeowners?
The rising cost of mortgages is likely to impact homeowners significantly. Those on variable-rate mortgages will see their payments increase as interest rates rise. While those on fixed-rate mortgages will not see their fees increase immediately. However, they will be locked into a higher rate when their fixed-rate period ends.

Homeowners struggling to make mortgage payments should contact their lenders for possible solutions. There may be options to help them, such as a payment holiday or a remortgage.

By Chimamanda U. Martha

Source: Coin Speaker

Shared Ownership
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Hong Kong buyers dominating foreign homeownership in England & Wales

House hunters from Hong Kong have been found to be the most prolific overseas buyers operating in the nation’s residential market, accounting for over 13% of all foreign-owned homes in England and Wales, according to newly released market analysis.

London lettings and estate agent, Benham and Reeves, submitted a Freedom of Information request to the Land Registry to ascertain the 50 most prominent foreign nations represented among individual residential property owners in England & Wales, and how many properties they own.

According to the data, buyers from the 50 most represented foreign nations among owners of homes in England & Wales combine to own 187,275 properties.

Hong Kong buyers most prominent nation

Buyers from Hong Kong own the largest proportion of these properties, with 24,759 homes representing 13.2% of the aforementioned total.

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Buyers from Singapore own 15,752 properties or 8.4% of the total; while buyers from the U.S. account for 6.4%.

Buyers from the UAE account for 5.7% of the total, while buyers from Ireland (5.3%), Malaysia (5.2%), China (4.6%), Australia (4.4%), Kuwait (4.3%), and France (3.7%) are also strongly represented on the national housing market.

Increase in foreign buyer numbers

These figures come after the total number of properties owned by buyers from the top 50 foreign nations increased by 3.8% between January 2022 and January 2023.

Ownership for Chinese buyers has increased the most in the past year, rising by 18.8% to own 8,736 properties.

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Hong Kong nationals have increased their presence by 11.6% since 2022, and Israeli buyers have increased their footprint on the national housing market by 9.8%.

Significant increases have also been recorded among buyers from Gibraltar (6.7%), Austria (6.7%), Turkey (6.7%), Egypt (6.3%), Norway (5.1%), Germany (4.8%), and Sweden (4.7%).

Among the top 50 most represented nations in England & Wales’ housing market, three have actually seen their ownership proportion decline in the past year.

Buyers from Ireland now own -3.5% less property, buyers from Taiwan have reduced ownership by -3.3%, and Russian buyers now own -0.5% less property than they did at the start of 2022.

Director of Benham and Reeves, Marc von Grundherr, commented:

“It’s no secret that England & Wales is a hugely attractive market for overseas property buyers, with London being a particularly desirable location. The stability of our property market offers reliably a profitable space for investment buyers, and our country, with its rich history and culture, has long held great appeal for people looking to buy outside of their home countries.

“Many experts believed that Brexit would result in there being fewer overseas owners as access to the EU was reduced and the anticipated economic struggles removed some of the profitability of investing in our great nation. Our exclusive research reveals that none of this has come to fruition and that, in fact, our market has only become more popular.

“While this popularity isn’t limited to one single nation, it’s certainly being driven by Hong Kong buyers who continue to be the most prominent foreign nations operating within our bricks and mortar market.

“This is certainly no new trend and Benham and Reeves has had a local Hong Kong office since 1995, helping those who are looking to purchase in England and Wales. However, it’s fair to say that our team of experts in Hong Kong have never been busier and we expect this to remain the case going forward.”

Source: Property Reporter

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Five-year mortgage rate hits 6% in yet more misery for homeowners

The average five-year fixed-rate mortgage has risen above 6% for the first time since November last year.

The typical rate across all deposit sizes was 6.01% on Tuesday, up from an average rate of 5.97% on Monday, according to financial information website Moneyfacts.

It is the highest level since former chancellor Kwasi Kwarteng’s mini-budget in November.

Meanwhile the average two-year rate nearly surged past 6.5%.

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Nearly 90% of outstanding mortgages are on fixed rates – many of which were taken out when home loans were at 2% or less.

It comes as the Bank of England pushed the UK base interest rate to 5% last month, opting for a bigger hike than most economists were expecting.

It marked the 13th time in a row that the central bank has pushed up rates, in efforts to quell rampant inflation across the UK.

The Financial Conduct Authority watchdog will hold a meeting with HSBC, NatWest, Barclays, and Lloyds for a meeting on Thursday after bankers have been accused of dragging their feet in passing on interest rate rises to savers.

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Government minister Johnny Mercer said homeowners needed to ‘hold their nerve’ over inflation, telling Sky News ‘things will get better’.

Lib Dem MP and Treasury spokeswoman Sarah Olney urged the Government to do more in response to climbing mortgage rates.

She said: ‘This is yet more mortgage misery for homeowners on the brink.

‘Rishi Sunak asking homeowners to hold their nerve is sounding more tin-eared by the day.

‘It shows this Conservative Government is just totally out of touch.

‘Conservative ministers sent mortgages spiralling through all their chaos and incompetence, now they are refusing to lift a finger to help.’

By Brooke Davies

Source: Metro

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Rising mortgage costs driving house sellers to cut asking prices

Vendors are increasingly willing to accept a sizeable discount from the asking price in order to secure a sale, research has found.

Its latest research, property portal Zoopla found that nearly half (42%) of sellers are accepting discounts of at least 5% from the asking price, the highest level seen since 2018. Meanwhile, 15% were accepting discounts of at least 10% from the asking price.

Zoopla pointed to rising mortgage costs for this trend, noting that mortgage rates moving above 5% had meant a hit of up to 20% in the buying power of those looking to purchase using a mortgage.

The higher mortgage costs are leading to a drop in demand, with Zoopla data showing there were 14% fewer buyers active in the market over the last four weeks compared with the same period a year ago.

However, supply is growing, with 18% more homes listed for sale in the last four weeks compared with the five-year average.

The study also found that annual house price growth has slowed to 1.2% now, with Zoopla suggesting “a return to modest quarterly house price falls” over the second half of the year as a result of rising mortgage rates and continued cost of living pressures.

House price growth was highest in Wales at 2.5%, and weakest in Northern Ireland where prices dropped 0.8%.

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Region watch

Looking at regional differences, market activity was found to be holding up better in Scotland, the North East and London. Southern England and the Midlands have performed the worst, with Zoopla noting these were places where house prices grew the most during the pandemic.

It suggested that house prices will fall by up to 5% this year, though over the longer-term house price growth will be “ a lot weaker” due to a realignment of house prices and household incomes.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Mortgage rates testing homebuyers

Richard Donnell, executive director at Zoopla, said the resilience of the market and particularly homebuyers is being tested by rising mortgage rates.

He continued: “Modest price falls will resume in the second half of 2023 as the supply of homes increases giving buyers more choice and room for negotiation on price. We still expect house prices to be 5% lower over 2023 and there is a very substantial equity buffer to absorb price falls which are likely to be concentrated across southern England.

“Demand for homes remains but those households looking to move home in 2023 need to be very realistic on pricing and get the view of agents on where to pitch their asking price to secure a sale.”

By John Fitzsimons

Source: Your Money

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‘Surprise’ as average UK house prices rise in April

Average house prices in the UK rose by 0.5% to £286,489 from March to April, Government figures show.

The Office for National Statistics (ONS) house price index for April showed that this was a 3.5% annual increase or £9,000 higher. The growth has dropped from the 4.1% yearly rise recorded in March. Additionally, average house prices were down £7,000 from their peak in September.

Prices still above pre-pandemic levels

Vikki Jefferies, propositions director at Primis, said the figures were not surprising, “given the strain of higher interest rates and unpredictability of the housing market”.

However, she added: “It is a positive sign that house prices still remain well-above pre-pandemic levels, and the downward trend has been much less pronounced than some predicted at the beginning of the year.

“The main challenge for homebuyers now is a volatile mortgage market, which has seen mortgage rates rise to their highest levels since Q4 2022. With more than 400,000 people seeing their existing fixed deals end between July and September, it is crucial that borrowers seek financial advice as soon as possible to ensure they are getting the best deal.”

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‘May be the last increase for a while’

Karen Noye, mortgage expert at Quilter, said it was a surprise that house prices had risen and added: “However, considering the mortgage storm that is currently battering the country, this is likely the last time we will see an increase in prices for some time.”

“This morning’s flat inflation figure will have been exactly what mortgage borrowers didn’t want to see as those with low-cost deals will be bracing for their mortgage deals to come to an end and sadly find that their monthly payments skyrocket.”

Regional differences

Average house prices in England increased by 0.5% month-on-month to £305,731, which was 3.7% higher than last year.

The greatest increase was recorded in London, where average values rose by 2.1% over the month to £533,687. Meanwhile, prices in the South East dropped by 0.5% to £391,766. These represented annual increases of 2.4% and 3.5% respectively.

At 2.4%, the annual uptick for house prices in London was the smallest growth recorded in April, while the North East saw the biggest jump with a 5.5% rise to £159,900. Compared to March, average house prices in the North East were 1.8% higher.

In Wales, the average house price fell since March by 1.3% to £212,834. Annually, this was a 2% increase.

Houses prices in Scotland rose by 1.3% on average since March to £187,150, which was also a 2% rise. Meanwhile, in Northern Ireland, average house prices fell by 1.8% month-on-month to £172,005 and recorded a 5% annual rise.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Property and buyer type

First-time buyers paid 0.6% more for their homes on average in April, with values coming to £238,114. Former owner-occupiers saw prices go up by 0.5% to £336,056. Annually, these represented rises of 3.3% and 3.7% respectively.

The value of an average detached home increased by 4.2% annually to £453,771, while a semi-detached home’s value rose by 4.5% to £278,729.

The average price of a terraced home went up by 2.1% to £231,525 compared to last year, while the average price for a flat or maisonette increased by 2.7% to £229,752.

By Anna Sagar

Source: Your Money

london
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London postcodes remain priciest for property sales

The latest research by London lettings and estate agent, Benham and Reeves shows that the W1K postcode of Westminster sits top of the table as the nation’s priciest so far in 2023.

Since the start of the year, the average home sold in the postcode has gone for a staggering £8m.

Westminster also accounts for the joint second most expensive, with the SW1X postcode seeing homes sell for an average of £2.45m along with the City of London’s EC4V postcode.

Camden’s WC2A postcode also ranks high with an average sold price of £2.1m so far this year and, in fact, London dominates the top 10 priciest postcodes in England and Wales.

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The priciest property postcode outside of London is currently the GU25 postcode in Runnymede where homes have commanded an average of £1.32m since the start of the year.

The TQ8 postcode in Devon has seen an average sold price of £1.3m with Cornwall’s PL28 ranking third, where the sold price sits at £1.23m.

Buckinghamshire’s HP8 (£1.2m), HP9 (£1.18m) and SL8 (£1.18m) also rank within the top 10, along with IG7 in Epping Forest (£1.09m), KT11 in Elmbridge (£1.035m), TN7 in Wealden (£962,500) and Guildford’s KT24 (£950,000).

Benham and Reeves director Marc von Grundherr, comments:“Much has been said about the London lethargic housing market performance since the start of the pandemic and the capital has certainly trailed other areas of the UK with respect to the rate of house price growth seen in recent years.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

“However, it remains the most prestigious pocket of the market when it comes to the nation’s priciest postcodes and by quite some margin, even in cooler market conditions like those that we’ve seen so far this year”.

He adds: “In fact, very few postcodes outside of the M25 can rival the might of London, but that’s not to say that there aren’t some very valuable postcodes dotted elsewhere around the nation.”

By David Burrows

Source: Mortgage Strategy

asset finance
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Asset finance new business grew by 12% in April 2023

New figures released by the Finance & Leasing Association (FLA) show that total asset finance new business (primarily leasing and hire purchase) grew in April 2023 by 12% compared with the same month in 2022. In the first four months of 2023, new business was 13% higher than in the same period in 2022.

The business new car finance and business equipment finance sectors reported new business up in April by 48% and 13% respectively, compared with the same month in 2022. The commercial vehicle finance and plant and machinery finance sectors reported falls in new business of 2% and 6% respectively, over the same period.

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Commenting on the figures, Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, said: “The asset finance market reported a year of sustained monthly new business growth in April supported by continued strong growth in the business new car finance sector. Annual new business in April at £35.3 billion was only 1% lower than the pre-pandemic peak in 2019.

“Asset finance supports business investment across all major industry sectors and business size. New business provided to larger businesses grew by 27% in April, to the manufacturing sector increased by 30%, and to the services sector grew by 11%, compared with April 2022.”

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By Lisa Laverick

Source: Asset Finance International