Falling Mortgage Rates – What Does This Mean For The Property Market? 

With the steadily increasing Bank of England base rate, the announcement of reduced mortgage rates from some of the biggest lenders in the market is welcome news for homeowners and prospective homeowners. Santander, Barclays, Halifax and Nationwide are some of the latest lenders to reduce their mortgage rates and fixed mortgage rates are edging towards 4%.

Mortgage Rates Falling: What does it mean for Property?

Towards the end of last year, mortgage rates increased rapidly as a result of the uncertain economic conditions and the result of the mini-budget in September 2022. In October 2022, the average two-year fixed rate reached 6% for the first time in over 14 years. 

According to mortgage brokers, the decrease in mortgage rates is expected to continue over the coming weeks. HSBC has just launched a 5-year fixed-term mortgage at 3.99% and Virgin Money is offering a 5-year fixed term at 3.95%.

Many people are wondering how mortgage companies can offer a fixed deal at a rate lower than the Bank of England base rate. The answer to that question is swap rates. The Bank of England base rate influences the swap rate (which is the rate at which banks borrow money from the markets) but also the swap rates are affected by the confidence in the economy and the general health of the economy. Now that confidence in the economy is growing again, the swap rates have fallen again.

What is Happening to House Prices? 

After two and a half years of an unprecedented rise in house prices, the average UK house price has fallen for the past four months in a row – including a drop of 1.5%t in December. This is undoubtedly a result of the previous increase in mortgage rates which affected buyer affordability. 

Towards the end of last year, the number of UK mortgages approved fell by 20% which is a huge drop. This is leading to homeowners having to reduce the price of their property so that prospective buyers can be approved for a mortgage. 

The predictions for house prices in 2023 vary wildly – with Capital Economics forecasting a fall of up to 12%, while Zoopla estimates around a 6% fall.

How is the Market looking so far in 2023?

So far, the market remains relatively quiet to normal conditions. RICS announced that agreed sales, house prices and new instructions remained on a downward trend in January. This is expected to remain in place for a while longer as the market adjusts to the recent changes. 

January marked the 9th month in a row of a drop in new buyer home enquiries. However, traditionally January and February are typically slow months for the housing industry, typically picking up in the Spring. Those looking to buy a property now may be able to bag themselves a bargain with homeowners desperate to sell.

How Do I Know if I Can Afford a Mortgage at the Lower Rates?

In this ever-changing market, using a mortgage broker is essential. They can do the hard work for you and find the best rates and the best products and let you know how much you can borrow. 

Money Saving Expert says “NEVER just go to your bank for a cheap deal”. Just because you bank with them, this doesn’t mean that they can offer you a better rate than other companies. 

A mortgage broker can also speak with you about the various home-buying schemes such as Shared Ownership or Government-backed home-equity loans which are aimed at helping first-time buyers onto the property ladder. 

With fixed-rate mortgages, the amount of interest payable remains the same throughout the fixed term, which can be for 2, 5 or 10 years. Once the fixed term period comes to an end, the interest payable will be based on the Bank of England base rate. If this increases, so will the monthly mortgage payments. 

Generally, the longer you fix the mortgage rate, the higher the interest rate. Essentially the lender is guaranteeing the rate and gambling on whether the rates will rise in future. Currently, this is not the case as many 5 and 10-year fixes offer a more competitive rate than 2-year fixes.

How Can GoodLaw Solicitors Help Me?

Here at GoodLaw, we understand the challenges of the property market and the current economic uncertainty. In these trying times, you need a law firm you can trust to help your move proceed quickly and efficiently with expert advice from experienced conveyancing lawyers. Contact us today to find out more information or to receive a detailed quotation for conveyancing. 

By Published On: February 15th, 2023Categories: Insights

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