A summer of ups and downs

Summer is here and activity in the housing and mortgage markets is hotting up… and cooling down at the same time.

Latest data from the Royal Institution of Chartered Surveyors has positive news on housing supply, with a run of thirteen successive negative monthly readings for new instructions coming to an end with a positive reading in May. This is the strongest reading for new listings since March 2021*.

House price outlook

House price growth dipped in May and notably the annual rate of growth fell to -1.0%, marking the first time since 2012 that house prices have fallen year-on-year2. It remains to be seen which direction the market will take in the second half of 2023.

Some are predicting that many homeowners will be forced to sell up when their current fixed-term mortgage deals end, which would see a boost to supply that might reinforce the downward price movement. Analysts are also suggesting that first-time buyers (FTBs) could be delaying their homebuying plans in the hope that mortgage rates or house prices are poised to fall sharply before too long.

Bank Rate

Meanwhile, the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) increased Bank Rate from 4.5% to 5% in June. Borrowing costs are now at their highest level since 2008. Those with tracker or variable rates have seen immediate higher repayments and those on fixed rates are contemplating their next move.

Mortgage Charter

Around 85% of lenders operating in the UK’s mortgage market have signed a government charter agreeing to support borrowers following a meeting with the Chancellor to discuss the impact of rising mortgage rates on homeowners.

The charter includes allowing borrowers to contact their lender for help without impacting their credit file and enabling borrowers who are up to date with payments to switch to a new mortgage when their fixed term ends without another affordability check. The ability to switch takes effect from 10 July and will be available six months before a borrower’s fixed term period expires.

Lenders will also help borrowers to plan for when their rate ends and offer support to those struggling financially. This may include extending their mortgage term to reduce payments, switching to interest-only, or temporarily deferring payments.

Return of the 100% LTV mortgage

One especially noteworthy development is the launch of a new mortgage product that allows FTBs to take out a loan on the full value of their home. The 100% loan-to-value (LTV) mortgage is exclusively for current renters and depends on their being able to prove a track record of timely rent payments. Otherwise, 100% LTV mortgages generally require a guarantor to cover any missed repayments.

Your home may be repossessed if you do not keep up repayments on your mortgage


*RICS, 2Halifax

27 July, 2023

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