Mortgage news

Today, the Bank of England (BoE) hiked base rate for the 10th consecutive time, by 0.5%. The current rate now stands at 4%. This rise is a continued attempt to curb inflation which currently sits at 10.5%.

Thankfully, this is likely to be the penultimate increase we see. The next meeting in March could see further interest rate rises to 4.25%-4.5% and then, stability begins. The second half of the year will see the rate plateau and eventually begin to drop. There is light at the end of the tunnel.

However, not everyone feels this sense of heading in the right direction. Homeowners and home buyers are stuck in a state of limbo. There are positive changes to the property market on one hand and negative changes on the other, pulling them in separate directions.

It’s a buyers’ market
Inflation hit a peak in October 2022. Since then, it’s been on a slow but sure decline. Alongside this, house prices are expected to reduce this year.

Compared to only six months ago, there’s far less urgency within the property market for buyers to make an offer. In fact, we’re beginning to see successful under offers being made. People are realising that inflated house prices are no longer viable.

Additionally, after a sharp spike in the Autumn of 2022 as a consequence of the mini-budget, mortgage rates have peaked and should begin to fall. Thankfully, an increasing base rate is unlikely to change this, which should come as a welcome relief for those either buying or re-mortgaging in the next 12 months and beyond.

We’ve gone from a sellers’ market to a buyers’ market in just six months, one of the most rapid u-turns since the 2008 recession. This change should see buyers feeling far more relaxed about their options in 2023, but it’s not that simple.

Borrowing money is becoming harder
The amount homeowners and home buyers can borrow is reducing rapidly. A year ago, individuals could borrow approximately five times their salary, it’s now decreased to four and a half times. Someone earning £30,000 would have been able to borrow £150,000 in early 2022. This year, the same person will only be able to borrow £135,000.

Lenders rely on ONS data to understand average expenditure on everyday items like food, gas, and petrol to set affordability criteria. With these things remaining expensive as the UK continues to battle with the cost-of-living crisis, the required income multiple may reduce again.

There shouldn’t be as much pressure on home buyers this year thanks to the current buyers’ market. However, they’re needing to make decisions quickly or risk missing out on better affordability criteria.

There are many factors that need to be considered when purchasing a home this year. The current buyers’ market is not as straightforward as it may have been in previous years. While mortgage rates are falling and available properties are easier to come by, affordability is tightening.

Anyone thinking about buying – whether they’re moving up the property ladder or as a first-time buyer – should speak with an adviser sooner rather than later. Speak to the team at Cooper Associates Mortgages today for support.