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Understanding the Differences and Benefits of Fixed and Variable Mortgages 

When it comes to obtaining a mortgage, one of the most crucial decisions borrowers face is choosing between a fixed or variable interest rate. Both options have their own unique advantages and disadvantages, making it essential for homebuyers to understand the differences between the two. In this blog post, we will explore the features, benefits, and considerations associated with fixed and variable mortgage rates, helping you make an informed decision that suits your financial goals.

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Fixed Mortgage Rates

Fixed mortgage rates refer to a type of mortgage where the interest rate remains constant throughout the loan term. Here are some key benefits of fixed mortgage rates:

a) Stability and Predictability: The primary advantage of a fixed mortgage rate is that it provides stability and predictability. Borrowers can accurately budget their monthly payments since the interest rate remains unchanged. This feature is particularly beneficial for those who prefer a consistent payment plan and want to avoid any surprises.

b) Protection against Rate Fluctuations: Another advantage of fixed mortgage rates is that they shield borrowers from interest rate fluctuations. Regardless of market conditions, the interest rate on a fixed mortgage remains the same, providing a sense of security.

c) Long-Term Planning: Fixed mortgage rates are ideal for long-term planning. Homeowners who plan to stay in their property for an extended period benefit from knowing their mortgage payments will remain unchanged, allowing for better financial planning.

However, it is important to consider potential drawbacks as well. For example, fixed mortgage rates typically come with slightly higher initial interest rates compared to variable rates. Additionally, breaking a fixed-rate mortgage contract before the term ends may result in penalties.

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Variable Mortgage Rates

Variable mortgage rates, also known as Adjustable-Rate Mortgages (ARMs), are loans with interest rates that fluctuate over time based on market conditions. Here are some benefits of variable mortgage rates:

a) Lower Initial Rates: Variable mortgage rates tend to have lower initial interest rates compared to fixed rates. This feature can be advantageous for borrowers who want to take advantage of lower rates in the early stages of their mortgage.

b) Flexibility: Variable mortgage rates offer flexibility, allowing borrowers to take advantage of potential rate decreases in the future. This option is particularly suitable for those who plan to sell their property or refinance their mortgage before the rate adjustment period begins.

c) Potential Cost Savings: If interest rates decrease over time, borrowers with variable mortgage rates can enjoy significant cost savings in the long run. This can result in lower monthly mortgage payments, allowing homeowners to allocate funds towards other financial goals.

However, it is essential to consider the potential risks associated with variable mortgage rates. As interest rates fluctuate, borrowers need to be prepared for increased monthly payments if rates rise. This uncertainty may not suit individuals who prefer a stable and predictable budget.

Conclusion

Choosing between fixed and variable mortgage rates is a significant decision that can impact your financial future. Fixed rates offer stability and protection against market fluctuations, while variable rates provide flexibility and potential cost savings. Consider your financial goals, risk tolerance, and the current market conditions before making a decision. Consulting with a UK Mortgage Broker can provide valuable guidance tailored to your unique circumstances. Remember, the right choice depends on your individual preferences and long-term financial strategy.

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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 Better.co.uk 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%.

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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

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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

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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

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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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First-time buyer mortgage applications hit six-month high in March – First Direct

The value of mortgage applications submitted by first-time buyers reached £8bn in March, the highest amount in six months, data from a bank has shown.

The First Direct first-time buyer trends report based on data from CACI revealed that the value of applications in March was also 42 per cent up on February’s £8bn.

However, despite the application value reaching its highest level since September last year, the first quarter of 2023 was down by 26 per cent compared to the same period in 2022. In March last year, the first-time buyer application value reached £10.8bn, marking a two year high.

Activity was more subdued in April as the value totalled £6.2bn, however, this was the second highest amount in six months.

The mortgage market as a whole, including homemovers and remortgagors, reached a value of £26.6bn in March. This was the first time the value of applications passed £20bn since September last year, and it was also £8.9bn up on February.

Carl Watchorn, head of mortgages at First Direct, said: “Typically, March and April tend to be some of the busiest months of the year when it comes to first-time buyer activity. March usually sees a sharp spike in applications after what is often a quiet start to the year.

“It’s really encouraging to see the market recovering during March and April to a level of applications not seen since September 2022. A closer look at this data also reveals that the value of first-time buyer loans has doubled since Q4 last year; a segment fundamental for a vibrant housing market.”

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The average first-time buyer loan was £211,766 in April, which was an 8.8 per cent increase or more than £17,000 rise since the start of the year.

First Direct said it was also the highest figure since July 2022 when the average loan amount reached £212,153.

Loan sizes among first-time buyers saw the biggest jump, but average homemover loans also rose by 14,200 since January while there was a £9,500 increase in average remortgage loans.

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

Watchorn added: “The news that average first-time buyer loans are increasing is likely indicative of increased confidence in the sector, although it does once again highlight the challenge faced by many young people trying to bridge the gap between average income and the average house price.

“It’s also important to consider that the average first-time buyer house deposit is now more than £60,000. Faced with higher rates than we’ve seen in a number of years, many buyers will be looking to save up as big a deposit as possible in order to secure a cheaper rate against a lower loan to value (LTV) product.”

By Shekina Tuahene

Source: Mortgage Solutions

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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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Leap in mortgage approvals signals market recovery

Bank of England statistics show that agreed mortgages climbed to 52,000 in March, up from 44,100 the previous month.

The total number of mortgage approvals has bounced back after hitting a new low at the end of last year, Bank of England figures show.

Mortgages agreed jumped to 52,000 in March, from 44,100 in February, as the market recovers from the damage caused by the Mini-Budget.

The overall total though remains below the monthly average for 2022 of 62,700.

LOWEST SINCE 2009

Approvals for remortgaging with a new lender also increased, to 32,200 in March from 28,200 in February. The ‘effective’ interest rate on newly drawn mortgages increased to 4.41% in March.

Gross lending increased slightly from £20.4 billion in February to £20.6 billion in March, while gross repayments fell from £19.9 billion to £19.3 billion.

Statistics from the Bank of England released in January showed mortgage approvals fell to the lowest level since 2009 if the slump during the Covid pandemic period was excluded.

Approvals for house purchases dropped to 35,600 in December, from 46,200 in November. This was the fourth consecutive monthly decrease, and the lowest since May 2020.

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INDUSTRY REACTION

Tom Bill, head of UK residential research at Knight Frank, says: “The UK housing market continues its convincing rebound following the chaos of the Mini-Budget.

“Price declines appear to be bottoming out and transactions clearly hit their low-point in January.

Buyers have accepted the new normal for mortgage rates as stability returns to the lending market. Boosted by savings accumulated during the pandemic, record levels of housing equity and a strong jobs market, we expect sales activity will be solid without being spectacular this year.”

Tomer Aboody, director of property lender MT Finance, says: “Higher mortgage approvals in March show that there is slightly more confidence in the market, which is cemented by the Prime Minister’s push for lower inflation, and the markets predicting lower long-term rates than first indicated.

“However, while rising, transactions are down compared with before the pandemic so some assistance from the government to try to push volumes is now required.”

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

Mark Harris, CEO of mortgage broker SPF Private Clients, says: “With mortgage approvals picking up again, it appears as though buyers are shaking off recent concerns about the wider economy and getting on with moving.

“The worst of the pain may not be over with another quarter-point rate rise expected next week as inflation proves to be more stubborn than the Bank of England expected.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “We regard mortgage approvals as a very useful indicator of future direction of travel for the housing market and these figures are no exception.

“Lending was in the doldrums, reflecting the quiet period between the Mini-Budget and the end of last year, whereas the approvals figures illustrate that stabilising mortgage rates and inflation is prompting an increase in activity.”

By David Callaghan

Source: The Negotiator