bank of england

Interest rates rise again…

  • In its August meeting, the Bank of England increased its base rate to 1.75%. Its sixth consecutive rise and its highest single rise in 27 years.
  • Many borrowers are protected from any immediate payment increase by fixed mortgage rates. 94% of new mortgages in Q1 2022 (gross advances) were on fixed rates.
  • And 84% of all existing outstanding mortgage lending was on a fixed rate by the end of Q1 2022.
  • This is quite different from 10 years ago when only 57% of new lending and 32% of existing lending were fixed rates.
  • For new borrowers, lending is getting more expensive. The average 5-year fixed rate in June was 2.9% for those with a 25% deposit and 3.5% for those with a 5% deposit according to the Bank of England. Source: Dataloft, FCA

So the inevitable has happened! It is great to see in the statistics that mortgage consumers were prepared (and probably well advised by their mortgage advisors) and are now in the best position to also get through the increased cost of living and save for their next home. It will be interesting to see how these figures differ for Q4. I anticipate we will see a higher figure than 94% of new mortgage applications being on a fixed rate.

As lending will begin to get more expensive this will affect the housing market in two regards; buyer activity and house prices. Over the last few months, we have seen the interest rates steadily increase, however, we are still registering and arranging viewings for an overwhelming amount of prospective purchasers but the costs of the mortgage combined with the rates available have been affecting the level of offer they have been putting forwards to our vendors.

Since the latest announcement, we have had more prospective purchasers revert back to us to negotiate offers on properties they have previously seen in a bid to secure a mortgage for a property, before the rates offered by the banks increase and potentially price them out of the mortgage based on their affordability.

I am excited to be heading towards September, one of my favourite months as an Estate Agent!  Historically this is the busiest time for properties to come to the market along with agreeing on a large number of sales. It will therefore be interesting to see how consumers respond to the increase in rates. I am looking forward to another month of achieving the best possible price for our vendors and helping prospective purchasers start their exciting journey of home buying. I fully expect the Croydon property market will continue to be buoyant with its affordable housing element.

Ryan Morgan Truuli Property Expert

Interest rates rise again… Read More »

Truuli - Bank of England

Has today’s interest rate increase made things difficult for aspiring homeowners?

The Bank of England’s Monetary Policy Committee has announced today that interest rates will increase by 0.25% to 0.75%, in a unanimous vote.
Today’s news will be welcomed by savers in general but not for those saving to get on the property ladder as any increase in savings rates won’t bridge the gap on rising house prices.
Homeowners not on fixed term mortgages will see an average rise of around £270 on their yearly mortgage payments.

The increase will be manageable for most homeowners, those that have stretched themselves financially to get on the property ladder or those aspiring homeowners may find the interest rate increase a bit more difficult to absorb.

Related story ……Economists predict an interest rate rise in the near future

Has today’s interest rate increase made things difficult for aspiring homeowners? Read More »

Economists predict an interest rate rise in the near future

With the royal wedding and recent record temperatures boosting the UK economy in May, economists predict an interest rate rise in the near future.

The UK economy grew by 0.2% in the three months leading to May, compared with the previous three-month period, the latest figures from the Office for National Statistics (ONS) show.

However, wages rose more slowly over the same period, wage growth, excluding bonuses, slipped to 2.7% from 2.8% in the three months leading to May, whilst unemployment decreased by 12,000 to 1.41 million.

For some, that means we could be in for higher borrowing costs as economists expect interest rates to go up next week. The predictions come as doubt was cast on a possible increase earlier this month. That came after inflation held tight at 2.4 per cent, instead of rising to 2.6 per cent as economists predicted.

It is likely to be relatively small, from 0.5% to 0.75%, and for the large majority of homeowners, not particularly painful, however, it would be the highest it has been since March 2009, when it was reduced from one per cent to 0.5 per cent during the financial crisis.

Like in all situations, there will be both winners and losers. The winners could include 45 million savers, who have seen some interest rate improvements after the previous rise in November. But at least four million households with variable or tracker rate mortgages are likely to see their payments increase once again.

Variable-rate mortgages
Throughout the UK, roughly 9.1 million households have a mortgage. About half of these are on a standard variable rate or a tracker rate, amounting to between four and five million households.
These are the people who would be most affected by a rate rise, as their monthly payments would increase.
According to the Nationwide, a 0.25% rate rise means someone on a £200,000 mortgage would face paying around an extra £25 a month, or about £300 a year.

Fixed-rate mortgages
The large majority of new mortgage loans (96%) are on fixed interest rates of two or five years. Currently half of all outstanding loans are on fixed rates, equating to about 4.5 million households.

Such rates have already started to rise since November’s rate increase.
When borrowers reach the end of their term, they may find they have to make higher monthly payments or be required to move lender to keep the mortgage affordable.
That said, they could, depending on when they took out their loan, end up on a cheaper deal. The lenders offering fixed rates tend to be especially competitive.

A recent survey of nine economists by website Finder concluded all of them predict a base rate rise, mostly because they believe the economy has strengthened, inflation is set to go up and so are wages, despite having stagnated so far.

But while there seems to be agreement over an improvement of the economy up to now and positive expectations about wages in the coming months, some economists were concerned about housing affordability and the rise in the cost of living.

Andrew Wishart of Capital Economics said: ‘The Monetary Policy Committee held off raising rates in May because it wanted to see evidence that the weak patch in economic activity at the start of the year was just a blip. ‘The official data and business surveys released since then suggests that growth did indeed recover in Q2. ‘With little slack left in the labour market, robust growth is likely to lead to a further increase in wage inflation. ‘Alongside the MPC’s ambition to return interest rates to a level from which they can be cut to help in the next downturn, we think that provides reason enough for the MPC to raise interest rates in August.’

Economists predict an interest rate rise in the near future Read More »

Scroll to Top