What's happening in the property market and mortgage rates in May?
Mortgages rates are currently ever-changing, as is the constant shift of the property market, but there are plenty of things to be optimistic about. Looking ahead, what do the most recent updates in the property industry currently look like for you, and what do the rates mean for your chances of moving in the near future?
With lenders changing the rates of their mortgage products regularly, people could mistake the market for being uncertain, but we are actually, and rather thankfully, seeing signs of improvement.
How do current mortgage rates look?
Mortgage costs have been continuing to fall nicely from their highest point, starting to settle from when costs were high after last September’s mini-Budget. The budget triggered a level of uncertainty throughout the market, and the pound crashed to historic lows. Major lenders including Barclays, Halifax, NatWest and Virgin Money pulled their deals off the market, returning them at a higher rate, and it was quite a difficult time for many, but that is thankfully changing now, and things are showing strong signs of repair.
As of Tuesday 25 April 2023, Rightmove released current UK mortgage rates, with much talk of Base Rate rises and how they can impact mortgage rates. The Bank of England (BoE) meets about every six weeks to discuss the Base Rate and whether it should go up or down, or stay the same. It recently increased from 4% to 4.25%, then at the most recent meeting on May 11th it increased from 4.25% to 4.50%.
Despite there being challenges posed by news that inflation remains high, there is resilience from lenders due to a desire to compete for business, which has actually seen the average rates for mortgage products fall this week. This fall is slow, but it is steady, and that is promising news.
Interest rates and mortgages
There are an estimated two million homeowners on variable rate deals, such as base rate trackers. Due to the recent Bank rate rise, they will start to see an almost immediate rise in their monthly repayments. As an example, a tracker rate rising from 4.5% to 4.75% costs around an extra £31 a month on a £200,000 loan taken over 25 years.
If you are on a fixed-rate deal, where the interest rate is locked in for two or five years, you won’t see any difference in what you pay back monthly. However, when this deal comes to an end, available mortgages are likely to be more expensive.
You can work out the monthly cost of a mortgage against various interest rates with the Forbes Mortgage Calculator.
House prices and Stamp Duty
The latest house price index from Nationwide Building Society reveals a house price fall of 3.3% in the 12 months to March. Prices are down 0.8% month-on-month. This is the seventh monthly fall in a row, leaving prices 4.6% below their highest, which was recorded back in August 2022. Rightmove says that the average cost of a listed for sale home in April is now £366,247. This is 1.7% higher than last year and just 0.2% up on last month.
This means now is still a good time to sell and with a well-considered marketing strategy in place (as offered by Sandersons UK) you could still meet or even exceed expectations on your property price. At Sandersons UK we have seen a significant increase this month in new properties coming to market, particularly at the mid-higher end of the market as confidence in the market and a desire to move remains strong.
Why are interest rates rising?
Interest hikes are used by the Bank’s MPC (Monetary Policy Committee) to cool the economy and tame rising inflation. The Consumer Prices Index (CPI) measure of inflation fell to 10.1% in the 12 months to March. This is higher than the 9.8% expected by analysts – due largely to rising costs in the food sector, but things are expected to settle soon.
Inflation peaked in October at 11.1% but had since largely been falling. The government’s inflation target for the Bank of England is set at 2%.
One of the main longer-term drivers behind rising inflation is the cost of energy. Since 1 April 2023 the energy price cap, as set by regulator Ofgem, has been capped at £3,280. The cost refers to an annual bill for a dual fuel household paying by direct debit based on typical consumption.
However, the government’s own Energy Price Guarantee (EPG) applies instead. Currently, the EPG is set at £2,500 a year.The EPG was actually supposed to rise to £3,000 from 1 April, but the government confirmed that the £2,500 limit will apply for a further three months, from April until the end of June 2023.
If you are thinking of moving or investing in property but unsure if now is the right time, please get in touch with your local team for market advice or a free, no obligation valuation on your property. If you would like to discuss your options with independent mortgage advisors with access to whole of market products please click here for the team to contact you.
