The following topics are covered below:
With the current Bank of England base rate sitting at 3.5%, we are going to give you a quick insight into what mortgages are looking like with the Residential and BTL market moving into the New Year.
As mentioned in our previous article, previously there was an increase of 0.75% to the BoE base rate and this time round another increase of 0.50%. Although there was an increase, it was lower than the previous. Indicating that there may be an element of the governments control of inflation having potentially reached its peak and will slowly start to reverse by next year to return to its targeted 2%. We can confidently say this has reflected in the mortgage industry, with the interest rates being reduced by lenders across the board, even after the recent increase.
With the High Street lenders, we can see fixed rates being reduced from 6-6.5% to now 4.5-5.5% for residential mortgages. For Buy-To-Let mortgages, there has been similar reduction of interest rates. However, there are also many alternative options provided by the lenders, whereby they are offering discounted variable and tracker products, ranging between 3.5-5% interest rates.
What we have found in the subprime lenders market is that lenders have also decreased interest rates from 7-8% to now 5-6%. Also, they are starting to reintroduce higher loan to value products (80% LTV) back on to the market, enticing investors with options to be encouraged by.
Lending criteria for consumers with defaults, CCJs and other adverse credit issues have also been eased for them to potentially gain access to mortgage products that would be more feasible for them. This tells us the precautionary measures taken by lenders to reduce risk when lending whilst the interest rate hikes have been somewhat relaxed.
All the above are great indicators that the mortgage market is slowly but surely beginning to make a U-turn from its journey to the peak. We are anticipating 2023 to be the year for our economy to work towards recovery and the mortgage industry to re-establish normality, encouraging consumers to return to the market and investors to regain confidence.
Inflation currently sits at 10.7%, which is lower than the figures announced in the last announcement. Bank of England’s long-term goal is to head back down towards the target 2%, in order to restore the economy to a healthy state. This may also mean that we see further base rate increases potentially up to 4-4.5%, leading up to autumn of 2023.
What does it mean for consumers who have personal financial credit commitments, mortgages and increase in costs for general day-to-day living standards?
Well, coming up to Christmas period where traditionally people spend the most in the whole year, they would now really have to watch their pennies. People are encouraged to save as much as they can, to take precaution in their budgeting and avoid not being able to make payments for current commitments.
For those who have mortgage commitments may be impacted by the 0.5% increase with immediate effect, especially those on Tracker products, which move in line with the Bank of England base rate. Lenders may also decide to adjust their standard variable rate which may also affect consumers.
Doom and gloom aside, since the last Monetary Policy Commitee meeting in the previous month, standard variable rates have decreased to an average of 6%. We can also see many lenders reducing fixed rates from 7% down to around and average of 5.5%. For those who have their fixed mortgage products coming to expiry, we also observe some lenders offering retaining customers fixed interest rate products averaging around 4.5-5%. So, we are seeing some positive progress in banks offering assurance to customers.
A common questioned asked by many, “what do you think happen over the next 3-6 months?”
This is a question that many of us may not have the answer to. However, it is advised and encouraged to all that may be looking to purchase, remortgage or considering switching to an alternate product with their existing lender to reach out to a financial advisor. This way you may be able to get support and advice in constructing the most affordable and feasible plan that will assist you in being best equipped in dealing with any changes to interest rates, prior to our journey in reaching Bank of England target inflation rate. Thus, allowing consumers to confidently spend and manage commitments to cater for their living standards.