Following the turmoil created by Kwasi Kwarteng’s mini-Budget and the reversal of most of its measures by his replacement, Jeremy Hunt, Swap rates – used by lenders to price fixed rates mortgages – continue to fall. At the time of writing, two-year Swaps had fallen from a high of 5.63 per cent after the Budget on 28 September to below 4.5 per cent. Lenders have been reducing their fixed-rate mortgages accordingly, with a number now available at less than 5 per cent. While fixed rates are still significantly higher than they were a couple of months ago. They are moving in the right direction. It is also possible that they could edge down further in the new year. Once lenders have new lending targets to meet and start competing for business once again.
Some clients are opting for variable-rate mortgages with no early repayment charges with a view to moving onto a fixed-rate mortgage once the pricing on these eases further. Variable-rate deals tend to be priced cheaper than fixes, at least initially, and if interest rates don’t rise as high as predicted. You may feel pleased that you went for this option. However, if you need the certainty of a fixed rates mortgage to help with budgeting. A variable rate may not be the most suitable option. It is worth seeking advice and chatting this through with a broker.
First time buyers
Despite rising interest rates and the cost of living, the housing market is proving to be pretty resilient. HMRC reported that transactions held up in October, with 108,480 during the month, a 38 per cent rise on the same month last year and a two per cent increase on September. This also means that transaction levels are still higher than pre-Covid levels.
While Jeremy Hunt announced that the stamp duty changes announced in the mini-Budget had a time limit. And would be removed by 31 March 2025, rather than the permanent move that was originally the plan. This should not disrupt the housing market too much as buyers still have plenty of time to take advantage of the measure. For now, no stamp duty is payable on the first £250,000 of a property purchase. With first-time buyers not required to pay any stamp duty on the first £425,000 of a property purchase (up from £300,000) and the value of a property on which first-time buyers can claim relief has risen from £500,000 to £625,000.
With inflation rising to 11.1 per cent in October. There are likely to be further interest rate rises to come in order to bring it under control. The Monetary Policy Committee has raised base rate at its past eight meetings to its current level of 3 per cent. But the Bank of England believes that the peak in rates that was originally priced into the market may be too high. Schroeder recently forecast a peak of 4 per cent in Bank Rate. However, wherever rates eventually settle, it looks as though we need to get used to living in a higher interest rate environment.
Remortgaging
Various indices also suggest that house-price growth is beginning to slow with the Office for National Statistics reporting that UK house prices rose by 9.5 per cent in the 12 months to September, down from 13.1 per cent in August and 15.2 per cent in July. In a separate document from the Office for Budget Responsibility (OBR). Which accompanied the Treasury’s Autumn Statement. It forecast that house prices could fall by as much as 9 per cent by 2024. However, this needs to be put into perspective. Even if such a fall did prove to be the case. It would take property prices back to where they were a year ago. This might also provide some cheer for first-time buyers. Who are struggling to save up a big-enough deposit to get on the housing ladder.
With so much continued uncertainty, it is important that borrowers seek advice when taking out a mortgage or remortgaging onto a new deal. AWS Private Finance is a whole-of-market broker who will scour the market for the best deal for your particular circumstances. Please get in touch for more information.
