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As the Bank of England puts rate rises on hold, what are the ups … and the downs?

With Britain appearing to have hit peak interest rates, homeowners and buyers may feel like celebrating, while savers will be shaking their heads.

The Bank of England’s decision to hold rates at 5.25% for a second time came after 14 increases. So what does this mean for consumers? Are we likely to see more affordable mortgage deals? And can we no longer expect bumper savings rates from the banks?

What just happened?

It was widely anticipated that rates would be left unchanged at 5.25% – their highest level for 15 years.

Over the past two years, mortgage borrowers have seen the cost of a home loan spiral. At the same time, savers finally started to enjoy some decent returns after years in the doldrums. A number of accounts are currently paying more than 6% interest, particularly some of those offered by the so-called challenger banks.

But the Bank of England was keen to point out that dropping rates was not on the agenda yet. Governor Andrew Bailey said last week: “It’s much too early to be thinking about rate cuts.”

Damien Fahy, at website Money to the Masses, says that if we are at peak rates, what is important now is how long we stay there. “The worry is that most consumers seem to believe that rate cuts will be around the corner, but they are probably getting ahead of themselves,” he says.

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Are there any good savings rates?

After the highs of the summer, there has been a definite slowdown, with only a handful of providers offering fixed-rate savings bonds paying more than 6%.

But this does not mean there are no opportunities, says Sarah Coles at investment platform Hargreaves Lansdown. “We may well have passed the peak, with some of the best fixed rates gradually disappearing. However, there are still decent rates around that we’d have given our left arm for a year ago.

“So if you have savings you won’t need for the next year or so, it’s still worth taking advantage while you can,” she adds.

Fahy says people should move now to secure the best rates, as banks will not hesitate to pass on any decreases (even though many did dawdle when it came to passing on increases).

However Rachel Springall, at financial information site Moneyfacts, says challenger banks may continue to offer good deals as they aim for funding targets and not alignment with the Bank of England.

When comparing rates, considering the more unfamiliar brands is always wise, assuming they have the same deposit protections as a big high street bank, she adds.

Savers looking for a good deal may find some value in notice accounts – once they can plan how they may want to withdraw their money – which limit the number of withdrawals a year. For example, Monument Bank has increased the rate on its 35-day notice account to 5.22%.

But consumers must be able to move quickly. “Whichever deal is appropriate, they must be clear on the rules and eligibility an account sets from the outset, and need to be quick to apply for a deal when monitoring the best rates,” says Springall.

What about mortgage rates?

The cost of new fixed rates – the vast majority of UK mortgage borrowers are on this type of deal – has been falling for some time. Figures from property website Rightmove on Thursday showed the average new five-year fixed-rate deal was 5.36%, down from 5.97% a year ago. The average two-year fix is 5.81%, down from 6.22% a year ago.

David Hollingworth, of broker firm L&C Mortgages, says borrowers can now look forward with a little more confidence, but adds that we will not see a return to the rock-bottom deals of the recent past.

“Remortgage borrowers shouldn’t fall into the trap of holding off from shopping around in the hope of dramatic cuts to rates, especially as the gap between standard variable rates [SVRs] and the best rates has only widened,” he says. “Getting a rate in place well before the end of your current deal still leaves flexibility to review it if they continue their downward trajectory.

“In the meantime, having a rate ready for a smooth switch will avoid being hit by a high SVR, which could prove costly, even for a short period.”

Fahy says borrowers should be aware of lenders trying to attract them with low interest rates but “eye-wateringly high” product/lender fees. “Consider the full cost of a mortgage and, if rates remain high for an extended time, we might see more of these types of deals.”

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

And pensions?

If there is an end to volatility as a result of the decision to keep interest rates on hold, pensions – which rely on market stability – could benefit, according to Becky O’Connor of PensionBee, a company that helps people combine old pension plans into one new plan.

“For those approaching, or in retirement, who have found managing their retirement and withdrawal plans stressful because of market ups and downs, this potential change in monetary policy direction might offer some respite,” she says.

“For those with money tied up in savings, it will be important to keep chasing decent rates, as high-paying accounts may not hang around for long.”

However, the good returns offered by annuities, which typically pay out a set income for life to a pensioner, may be limited.

For years, rates on annuities had been derisory, leading them to be dismissed as an option for many approaching, or in, retirement. But with higher rates came better offers.

Chris Flower, at wealth management company Quilter, says: “For retirees looking to purchase an annuity, as interest rates level off, this may mean the level of income they can secure levels off, too.”

By Shane Hickey

Source: The Guardian

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Mortgage brokers are stepping in to help customers navigate rates

There has been a rise in the number of people turning to mortgage brokers for guidance, with many customers unsatisfied with their lenders.

Deciding whether to navigate the mortgage market solo, or enlist the help of a qualified broker, is a major step when it comes to buying or remortgaging a property.

In recent times, with interest rate hikes making borrowing much more expensive than it was a year ago, the market can feel more daunting than it was during the period of ultra-low interest rates many had become accustomed to. And it seems some lenders aren’t offering as much support as customers would like.

New research from Butterfield Mortgages has found that less than half (44%) of customers are satisfied with the support and communication they received from their mortgage provider since the start of 2022, including the period where interest rates began to climb.

Meanwhile, two thirds (66%) of those surveyed said they believed lenders should offer greater flexibility in the current climate. This has led to a rise in the number of people considering using mortgage brokers, with 50% of respondents saying they are more likely to use one to help them understand the products available.

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Branching out for a better deal

Butterfield’s research also found that more than a third (37%) of mortgage customers are now more likely to look at smaller, independent and specialist lenders as opposed to traditional high street options and the big banks.

Alpa Bhakta, CEO of Butterfield Mortgages, said: “Over the past year, mortgage customers have had to grapple with a string of consecutive interest rate hikes, which is evidently creating challenges for many.

“With interest rates once again on the rise, it is increasingly important that mortgage customers feel supported by their lenders and that we, as an industry, are doing everything we can to provide the right levels of guidance, communication and flexibility amid the ongoing economic challenges.”

The latest data from indicates that the average rate for a two-year fixed rate deal is currently 6.41% across all borrower types. The three-year rate average is now 6.06%, while to fix for five years the average rate is currently 5.97%.

Of course, within these averages, there will be variations depending on the lender, any additional incentives or deals available, and your individual circumstances.

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

Pros and cons of mortgage brokers

During uncertain times, and with most forecasts indicating that rates are unlikely to fall significantly in the short-term, navigating the mortgage market and securing the best deal is more important than ever.

Often, buyers and investors with more complex needs tend to use mortgage brokers to help them with their application. For example, those who are self-employed, or portfolio landlords, may use mortgage brokers to help them access the market.

One major advantage of using a broker is that they can save you time, as you will only need to make a single application, rather than potentially multiple ones to various lenders. They can also more easily scan deals across the whole market.

Mortgage brokers are also experts in the field, and can offer some much-needed expertise in the buying and financing process, which many find useful. Having knowledge of the market might mean they can find the best deal for an individual’s personal circumstances and needs.

Some mortgage brokers are able to secure more favourable rates than a borrower would if they went straight to the lender, although this is not always the case. They may even be able to reduce your product fees.

On the other hand, some lenders do not open up their offers to mortgage brokers and only offer them directly to borrowers, so it can still be worth checking you are getting the best rate.

Mortgage brokers also typically charge for their services, and this tends to be either a fixed fee or based on the total loan amount. For many borrowers, the benefits of using a broker make the fee worthwhile, but it will depend on the customer’s circumstances.

By Eleanor Harvey

Source: Buy Association

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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%.

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

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

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UK interest rate rise: how will it affect you?

The Bank of England has yet again hiked interest rates, in the 12th consecutive rise since December 2021. This time the increase is 0.25 percentage points – taking the base rate to 4.5%. So what does that mean for your finances?

How will mortgage payments be affected?
Thursday’s move is yet more bad news for the 2.2 million people on a variable rate mortgage. Roughly half are either on a base rate tracker or discounted-rate deal, with the remaining 50% or so on their lender’s standard variable rate (SVR).

A household with a tracker mortgage currently at 5.25% will see their pay rate rise to 5.5%. These deals directly follow the base rate. This means their monthly payments will rise by £21 a month, assuming they have a £150,000 repayment mortgage with 20 years remaining. Their monthly payments rise from £1,011 to £1,032.

The increase may not sound much, but as recently as last June that same household would have been paying £776 a month, meaning their payments have risen by a third in just under a year – equivalent to a £3,000 annual increase.

A household with a £500,000 tracker mortgage with 20 years to go will see their monthly payments rise by £69 to £3,439 a month as a result of the latest increase.

SVRs change at the lender’s discretion, but most will go up, though not necessarily by the full 0.25 percentage points. Some lenders may take some time to announce their plans, but householders can similarly brace themselves for higher payments.

If you are one of the 6 million-plus households with a fixed-rate mortgage, you are unaffected by the latest rise. This group of borrowers will only feel the pain when their current deal expires and they have to renew, which might be in anything between a few weeks or a few years.

And it could be about to get even more painful. The US investment bank Goldman Sachs warned this week that the Bank of England could be forced to raise interest rates to 5% this summer.

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What about new mortgages?
The last few months have been a fast-moving and stressful time for anyone looking for a new fixed-rate home loan, whether it’s to buy their first property or to replace a deal that is coming to an end.

The mortgage market has settled down a lot after the chaos of last September’s Truss government mini-budget, as witnessed earlier this week with the news that Skipton building society has launched a 100% mortgage deal, albeit one where you have to fix for five years at a higher-than-average rate of 5.49%. Standard no-deposit mortgages have not been available since 2008, in the immediate wake of the financial crash.

While new fixed-rate mortgage pricing is not directly influenced by the Bank of England base rate and is largely dependent on money market swap rates, Chris Sykes, technical director at mortgage broker Private Finance, said these have been “slowly edging up lately and are now around 0.3% higher than they were a month ago in April”.

On Thursday morning, the Principality Building Society was offering a five-year fixed-rate mortgage at 4.05% aimed at buyers not looking to borrow more than 75% of the property’s value. Meanwhile, for a first-time buyer of a £200,000 home with a £20,000 deposit, First Direct was offering five-year fixes at 4.44% for those looking to borrow 90%. Several other lenders have similar deals around the 4.45% mark.

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

This is good news for savers, isn’t it?
When the Bank started raising interest rates back at the very end of 2021, the very best easy access savings rate was paying just 0.67%. The succession of interest rate increases have made things better for savers, but the highest-paying instant access account (offered by Chip) is still only paying 3.71% when the current rate of inflation is 10.1%.

In anticipation of Thursday’s increase in the cost of borrowing, several of the online savings providers have been upping rates in a bid to lure in customers. Those happy to lock their money away for a year can now receive 4.91% from HTB. Rates of around 4.9% can be found if you are happy to invest in a fixed-rate bond of two to five years’ duration. By contrast the highest paying five-year fixed-rate savings bonds in March were paying 4.6%.

In the past few weeks, the Commons Treasury select committee has been campaigning to get the big high street banks to increase the savings rates offered to loyal customers. While the online accounts above are paying fairly attractive rates of interest, easy access accounts at many of the big banks are still offering pitifully low returns.

Will more people now get into arrears?

Frankly, yes. On Monday the consumer group Which? warned that an estimated 700,000 UK households missed or defaulted on a rent or mortgage payment last month. Which? said 3.1% of the home loan borrowers it surveyed had missed a mortgage payment last month.

Alastair Douglas, chief executive of the site TotallyMoney, says: “The advice is that if you are struggling, contact your lender and ask for support – and remember this won’t impact your credit rating. However, missed payments can – and they could stay on your credit file for up to six years. If these persist, you might end up in mortgage arrears, leading to court action and even repossession.”

What about credit cards and loans?
Expect higher interest rates on credit cards and pricier personal loans for new applicants. However, most unsecured personal loans have fixed rates, so if you already have one, your monthly payment will not change.

By Miles Brignall

Source: The Guardian

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Confidence is Up, But Higher Interest Rates Are Biting

This is an interesting spring for the housing market.

For every negative indicator, there is usually a more positive one and, while conditions have clearly improved in comparison with the panic of last autumn, housing is still adjusting to the higher interest rate environment. That adjustment is still underway.

One positive in recent days came with the news that consumer confidence, while still at historically low levels, is on the up.

The closely watched GfK consumer confidence index rose six points this month, its third increase in a row. Every measure in the index showed a rise.

Perhaps most significant for the housing market was a rise of eight points in how people see their personal financial situation over the next 12 months, and an increase of five points in the major purchase index, which measures whether respondents see this as a good time for a big purchase.

“There’s a sudden flowering of optimism with big improvements across the board,” said Joe Staton of GfK.

“The eight-point jump in how we see prospects for our personal financial situation is a dramatic change that might suggest household finances are stronger than we thought.”

This is good news, coming as it does before the cost-of-living squeeze is over.

It may reflect the fact that the winter was not as bad as feared, so a collective sigh of relief.

It comes in spite of the fact that recent inflation figures have disappointed, with the rate staying above 10%.

The question is whether this better news on consumer confidence, alongside still healthy readings on jobs and unemployment, will be enough to offset the impact of higher mortgage rates on the housing market.

An interesting perspective on this has been provided by Michael Saunders, who until September last year was a member of the Bank of England’s monetary policy committee (MPC), and is now a senior adviser to Oxford Economics, a consultancy.

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One of the key points of his new analysis is that it is easier to see evidence of the impact of monetary tightening – higher interest rates – on the housing market than other areas of the economy.

On two such measures, mortgage approvals and the Royal Institution of Chartered Surveyors house price balance, the sharp rise in official interest rates over the past 18 months has led to more pronounced weakness than is usual in periods when the Bank has raised rates.

“Typically, housing, which is very interest rate-sensitive, starts to weaken two-three quarters after the first interest rate hike,” he writes, adding:

“In this tightening cycle, we have already seen a relatively large deterioration in housing guides.” Where housing leads, the rest of the economy should follow, particularly in terms of slower growth in pay and prices.”

Even the official house price index, published on the same day as the disappointing inflation figures, is coming down to earth, House price inflation, at 5.5%, is half that of general inflation, 10.1%, and on the latest reading prices have fallen for three consecutive months, though only by about 2% from their peak late last year.

The good news in Saunders’s analysis is that, as somebody who was a “hawk” when on the MPC, he sees a need for only one more rate hike, an increase in Bank rate next month from 4.25% to 4.5%.

That is also the view of the economists at Pantheon Macroeconomics.

But in their monthly UK Housing Outlook, they see a peak to trough fall in house prices of 8%.

They also note that housing demand remains weak at present and that the drop ion mortgage rates since last autumn’s scare has probably reached its nadir.

Mortgage rates will edge higher over the summer, they say.

The big picture is that the market is still adjusting to higher interest rates.

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

As Pantheon puts it:

“Affordability will continue to put off prospective buyers for some time yet.

Indeed, a typical two-earner household will have to commit to monthly mortgage payments equal to around 28% of their disposable incomes, well above the 2010-to-19 average, 21%, if they want to buy an average property.

First-time buyers also have been disadvantaged by the relatively modest fall in high LTV ratio mortgage rates.”

It is a long way from a housing crash, more a slow deflation, and it has a little bit further to go.

By David Smith

Source: Property Notify

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Bank of England boss signals interest rates may have peaked

The Bank of England governor, Andrew Bailey, has signalled interest rates may have peaked after 10 successive increases in the official cost of borrowing since December 2021.

Speaking in London, Bailey said Threadneedle Street would assess the impact of tighter policy on the economy before sanctioning any fresh moves.

However, the governor also warned that the Bank was alert to the risk of repeating the mistakes of the 1970s and would not hesitate to raise rates further from their current 4% should inflationary pressures become embedded.

Bailey voted for a quarter-point increase in interest rates at the last meeting of the Bank’s nine-strong monetary policy committee in February but made clear on Wednesday that he was now adopting a wait-and-see approach.

“At this stage, I would caution against suggesting either that we are done with increasing Bank rate, or that we will inevitably need to do more,” he said. “Some further increase in Bank rate may turn out to be appropriate but nothing is decided. The incoming data will add to the overall picture of the economy and the outlook for inflation, and that will inform our policy decisions.”

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Financial markets have been pencilling in further increases in interest rates later this year, but analysts said Bailey’s speech pushed back against this idea.

Samuel Tombs from Pantheon Macro said: “It is clear from Mr Bailey’s speech that committee is placing more emphasis on the substantial tightening already delivered and would like to call time on its hiking cycle as soon as it feasibly can. It makes little sense at present, therefore, to price-in a terminal rate at 4.5% or higher.”

Krishna Guha from Evercore said Bailey had “become the first central bank chief to push back against the hawkish global repricing of rates in recent weeks that pushed the market discounted peak UK bank rate close to 5%”.

Bailey said the Bank’s outreach programmes with the public had brought home to him the impact high inflation was having on people’s lives. Although it has fallen back slightly from its peak of 11.1% late last year, the government’s preferred measure of the cost of living still shows inflation running at 10.1%.

“People should not have to worry about inflation in this way,” the governor said.

Bailey added that the UK had been hit by a series of “significant economic shocks” – including Brexit, Covid and the rise in global energy prices linked to Russia’s invasion of Ukraine – and there was “no easy way out”.

People on lower incomes were struggling to make ends meet and the Bank needed to ensure that the situation did not get worse through allowing “homemade inflation” to take hold.

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

“I am afraid monetary policy cannot make the shock to our national real income go away. But what monetary policy can – and must – do is to make sure that the inflation that has come to us from abroad does not become lasting inflation generated at home. Homemade inflation will not make us any better off as a country. Those with weak bargaining power will fall further behind.”

Bailey said failing to raise interest rates now may necessitate tougher action later. “The experience of the 1970s taught us that important lesson. But equally … we have to monitor carefully how the tightening we have already done is working its way through the economy to the prices faced by consumers.

“Our outreach events make clear that we need to calibrate monetary policy with great care to return inflation to target sustainably.”

Bailey said the shortage of available workers across much of the UK economy would be a key factor in future decisions by its ratesetters.

“The UK labour market remains very tight. Since the start of the Covid pandemic, we have seen a large increase in the number of people who do not take part in the labour market in this country. The UK labour force has shrunk.”

By Larry Elliott

Source: The Guardian

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Where does the housing market stand with a 3% base rate?

With constant increases in the Bank of England base rate, mortgage rates have been hitting the headlines with regularity.

While rates have risen, housing market sentiment has fallen. A record half (52 per cent) of adults across Britain disagreed it was a good time to buy a property, according to a September survey by the Building Societies Association.

So where does this leave first-time buyers, and those looking to remortgage?

Mark Harris, chief executive of SPF Private Clients, says that for first-time buyers it is arguably as good a time as any to buy, if they have found a home they want to purchase, are happy with the price they are paying, can afford to pay it and are prepared to stay put for a few years.

“Buyers will be aware that there is talk of property prices falling and potential negative equity for first-time buyers in particular because they tend to take on higher loan-to-value mortgages.

“But such issues are only really a problem if the buyer intends to sell again in the short term. Over time, prices tend to appreciate in value and usually recover even if they dip initially.”

Richard Howes, director of mortgages at Paradigm Mortgage Services, says first-time buyers could take advantage of any fall in house prices, but adds: “It’s the issue of affordability coupled with the cost of living increases that could really impinge on their ability to buy.”

With falling house prices widely predicted across the market, Simon Gammon, managing partner of Knight Frank Finance, says it is reasonable to expect lenders to be hesitant about offering competitive high LTV mortgages.

“We have already seen a reduction in the number of 90 per cent and 95 per cent mortgages available, and those that are still available come at a significant premium in terms of rate. We can therefore expect it to be harder for first-time buyers to get onto the property ladder in the foreseeable future.”

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Just Mortgages national director Carl Parker says it is without doubt becoming more challenging for both first-time buyers and those looking to remortgage after a low fixed rate.

“This is just because rates have risen so quickly, making it hard for people to adjust. However, swap rates are starting to fall back and therefore mortgage rates are dropping a little too. However, they are unlikely to ever return to the historic lows of the past 10 years.”

Vikki Jefferies, proposition director at Primis Mortgage Network, also points to fixed rates stabilising despite the 0.75 percentage point increase in bank rate. But she agrees that borrowers reaching the end of a fixed rate will be faced with higher rates than they are used to.

“This may come as quite a shock for some, especially with house prices falling and reductions in loan-to-value ratios. As a result, product transfer could prove to be a better option for some as customer loyalty can be considered, which sometimes includes preferential rates.

“With fixed rate mortgages currently seeing higher rates than standard variable rate mortgages, talking through the options available to clients is now more important than ever.”

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

Indeed, Harris at SPF Private Clients says many clients are seeking variable or tracker rates with no early repayment charges to remortgage. “These are comparatively so much cheaper, at least initially than a fixed rate.

“[Clients] plan to move onto a fixed rate, once pricing of these falls. Meanwhile, if interest rates don’t rise as fast or as far as previously predicted, a variable rate mortgage may turn out to be a good option.”

When it comes to house prices meanwhile, Howes at Paradigm Mortgage Services cites expectations of price growth to slow, rather than prices to fall. “With the recent surge in prices since Covid, most homeowners will have equity they can utilise.

“Indeed, the average LTV of the top five lenders is 60 per cent and they cover around 72 per cent of all lending in the UK, so the average person looking to remortgage should be okay.

“What is of concern though is that remortgage affordability could be an issue, and of course the conveyancing market with its delays and current timescales makes it less attractive than perhaps doing a further advance and product transfer.

“This area could be an issue for advisers, where the DIY product transfer could come into play, at a time when advisers are needed more than ever.”

Parker at Just Mortgages agrees that the need for mortgage advice is at its peak. “The daily fluctuation in mortgage rates has made the role of brokers absolutely vital to help borrowers assess their affordability against changing criteria, and navigate options in this mortgage landscape.

“It is also essential that brokers make the time to reach out to existing clients, to see what help and advice they need, and help to put their minds at rest during this changing interest rate environment.”

By Chloe Cheung

Source: FT Adviser

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Biggest mortgage lender increases rates on deals for new borrowers

The UK’s largest mortgage lender says it will increase rates on Wednesday as the cost of new fixed rate deals continues to climb.

The Halifax, part of Lloyds Banking Group, will put up the interest rates on a range of deals for new borrowers to well over 5%.

“On October 5, we’ll be updating the rates on our homebuyer mortgage range,” a spokesperson for the Halifax told STV News.

“We continue to have a range of fixed-rate product terms available up to 95% LTV (loan-to-value). The new rates reflect the continued increase in mortgage market pricing over recent weeks.”

The Halifax’s decision means its rate for a two-year fixed deal for a customer offering a 25% deposit is up from 4.61% to 5.84%.

A five-year fix with the same deposit will stand at 5.44% from Wednesday and a ten-year fix at 5.34%.

Many leading British banks are re-entering the mortgage market with interest rates of almost 6%, after halting new fixed-rate home loans last week.

Four days ago, the rate was 5.43% and at the start of December it was 2.34%.

Barclays, Skipton Building Society, NatWest, Virgin Money and Nationwide are among the lenders to increase their rates on new mortgage deals after chancellor Kwasi Kwarteng’s raft of tax cuts prompted concerns for the impact on inflation.

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1.8m fixed rates to end
Last month, the Halifax temporarily withdrew from the market all of its mortgage products that come with a fee amid continuing volatility surrounding the pound.

Several other lenders – including Virgin Money and Skipton – also pulled products from the market.

With mortgage rates generally on the rise, alongside other household bills, and many mortgage products having recently vanished from the market, more people may find it a struggle to keep up with their payments in the months ahead.

While the majority of mortgage holders are on fixed-rate deals, 1.8 million fixed deals are scheduled to end next year – meaning some homeowners could be in for a bill shock when they do eventually come to take out a new mortgage.

The interest rate on a new, average two-year fixed deal has risen consistently since Kwarteng’s mini-budget.

On the morning of the speech on Friday, September 23 it was 4.74%. Now, it is 5.97%. A five-year fixed deal has typically risen from 4.75% to 5.75% over the same period.

‘Weakest start to month’
October has seen the weakest start to the month for mortgage product choice in more than 12 years, according to financial information website

Some 2,258 residential mortgage products were available on Saturday October 1, the lowest figure for the first day of a new month since May 2010 when 2,087 deals were available, it said.

Lenders pulled mortgage products from sale in large quantities last week amid market turmoil following the mini-budget.

On the first day of September this year, there had been 3,890 mortgage products for sale.

By Monday this week, there had been a slight improvement compared with Saturday, with 2,262 mortgage products to choose from.

Rachel Springall, a finance expert at said: “Borrowers may be concerned to see a further fall in mortgage availability, but many lenders have been very vocal that their withdrawals are on a temporary basis amid interest rate uncertainty.

“Seeking advice from an independent broker would be wise, especially for those borrowers who have not yet started the mortgage process and are deterred from the level of choice and much higher mortgage rates than they were perhaps anticipating.

“The next few weeks will be crucial to see where lenders go from here, but we have already seen some new fixed deals arrive since last week.”

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

Government pledges
Prime Minister Liz Truss said on Tuesday the UK Government will do “what we can” to support households over the coming months, amid growing concerns about the pressure rising interest rates will put on millions of people across the country.

She also insisted that her government would help households through the cost-of-living crisis, but also pointed to her and the Chancellor’s dash for growth as the antidote to some of the problems facing the country.

But Truss, who in recent days has been forced into two major U-turns amid backbench outcry over Kwarteng’s mini-budget, offered no specific reassurances for households who could be facing a steep rise in interest rates in the weeks and months to come.

Asked if the UK Government might be able to help struggling households, she acknowledged that people were “worried” about the cost of living and rising inflation, but once again said that interest rates were a decision for the Bank of England.

There is an expectation that the Bank of England could feel compelled to step in with another interest rate rise in the weeks to come, following the Chancellor’s mini-budget last month, in order to further calm the markets.

Such a move would only add further pressure to homeowners and those trying to buy a house.

Truss said: “We’re also doing what we can to help homeowners through stamp duty reductions [in England].

“The reality is, though, that interest rates are set by the independent Bank of England. They make those decisions on the basis of what’s happening with inflation and other factors.

“That’s why we have acted decisively on the energy price guarantee. We’re also doing what we can to help homeowners through stamp duty reductions. The reality is, though, that interest rates are set by the independent Bank of England.

“They make those decisions on the basis of what’s happening with inflation and other factors.”

By Kevin Scott

Source: STV News

Marketing No Comments

Interest Rate Hikes and the Housing Market: “Hurry if You’re Selling, Halt if You’re Buying”

The Bank of England will raise interest rates again on Thursday, with Bank Rate to rise by 75 basis points to 2.50%, according to current money market pricing, which will have significant implications for the housing market.

The market meanwhile looks for a further ~125bp over the remainder of the year, implying a terminal rate that could be as high as 3.5-4.0%.

In response, analysts at CMC Markets say of the housing market: “hurry if you’re selling, halt if you’re buying, stay if you’ve borrowed”.

They say the increase in Bank Rate directly impacts mortgages on variable rates, believed to be around 1 in 5 households in the UK.

But another 3.1 million households will be renewing mortgages when their fixed-rate periods expire in 2022-2023, according to UK Finance estimates.

Borrowers whose repayments are directly linked to the base rate, as set by the Bank of England, will now face mortgage repayments at rates between 3% and 4%, up from 1.75% and 2.75% only five months earlier.

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This will inevitably spill into rent prices.

“Landlords will likely increase rent prices or sell to cope with increased mortgage repayments,” says CMC Markets, in a recent note.

CMC Markets analysed the latest data for June 2022 from HM Land Registry, published on August 17th, and concluded that the likely tendency for house prices is in a temporary slowdown, which is good news for those waiting a little longer to buy a home.

“Houses sold in June 2022 only increased in price by 1% compared to May, whereas, last year, this constituted a much more generous 5.7% surge. This is only the first month this year for prices to slow down at such a fast rate, so some caution before jumping to conclusions is advised,” says Michael Hewson, Chief Market Analyst at CMC Markets.

Nationwide said house prices were up 0.8% month-on-month in August, after taking account of seasonal effects

Hewson says although house prices may be slowing down, they are not decreasing.

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

But, other analysts are warning of outright declines over the remainder of the year.

“We now expect house prices to fall by around 2% in the second half of the year, rather than just hold steady,” says Gabriella Dickens, Senior UK Economist at Pantheon Macroeconomics. “The recent surge in risk-free interest rates and mortgage rates has been so severe that we now doubt that a period of falling house prices can be avoided.”

For those still keen to get on the property ladder, Hewson advises there are plenty of fixed-rate banking products that can insulate them from the current spiralling interest rates on mortgages.

“They should, however, prepare for the possibility of being faced with higher-than-expected repayments once the fixed rate period expires, as the new variable rates are at the lender’s discretion. Fixed rates are not a cure-all either, as they may now be set to a higher level to start with,” he says.

Turning to the buy-to-let market, landlords are expected to either pass the increased mortgage repayments onto tenants by increasing their rent or simply sell fast to lock in a better price.

“Right now though, those already on the property ladder are generally better off staying put rather than moving or re-mortgaging. They would not get a good deal on their old house in this market and may likely end up losing more money overall,” says Hewson.

By Gary Howes

Source: Pound Sterling Live

Marketing No Comments

Bank of England predicts 7.25% growth in economy as interest rates held at 0.1%

The UK’s economy could grow by more than 7% in 2021, according to the latest Bank of England forecast – the fastest pace since the Second World War.

Their projection is that the UK gross domestic product (GDP) – a measure of the size of a country’s economy – will rebound by 7.25% and mark the best year of growth since official records began in 1948.
This represents a sharper recovery than the central bank’s previous forecasts, with 5% growth previously expected.
It comes after the pandemic saw the UK suffer the biggest drop in output for 300 years in 2020, when it plummeted by 9.8%.

But the Bank’s quarterly set of forecasts showed it downgraded its growth outlook for 2022, to 5.75% from 7.25%.

The rosier view for the economy this year came as the Bank’s Monetary Policy Committee (MPC) held interest rates at 0.1%.

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The Bank kept its quantitative easing programme on hold at £895 billion, although one member of the MPC voted to reduce it by £50 billion given the brighter recovery prospects.
In minutes of the latest decision, the Bank of England said the lockdown is set to see GDP fall by around 1.5% – far better than the 4.25% drop first feared.

It also sharply cut its forecasts for unemployment over the year.

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

The Bank said: “GDP is expected to rise sharply in 2021 second quarter, although activity in that quarter is likely to remain on average around 5% below its level in the fourth quarter of 2019.

“GDP is expected to recover strongly to pre-Covid levels over the remainder of this year in the absence of most restrictions on domestic economic activity.”

But it warned over “downside risks to the economic outlook” from a potential resurgence of Covid-19 and the possibility that new variants may be resistant to the vaccine.

Source: iTV

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