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UK Mortgage Rates Reaches 15-Year High as Housing Market Slows

Marketing July 12, 2023 No Comments

Matthew Ryan, head of market strategy at global financial services firm Ebury, anticipates that the central bank will hike interest rates to around 6.35% within the first three months of […]

Matthew Ryan, head of market strategy at global financial services firm Ebury, anticipates that the central bank will hike interest rates to around 6.35% within the first three months of next year.

Mortgage rates in the United Kingdom have reached a 15-year high, adding pressure on homeowners and slowing the housing market. According to data from Moneyfacts, the average two-year fixed rate for residential mortgages has now peaked at 6.66%, a little increase from the 6.63% it recorded on Monday, July 10. Last year on October 20, the mortgage rates were at 6.65%. However, the new rates represent the highest level homeowners in the UK have seen since August 2008, during the global financial crisis, bringing mortgage costs to their highest levels for nearly two decades.

UK Housing Market Attempted a Comeback Early This Year

The country’s housing market has been on a roller coaster ride recently. After a turbulent start to the year, the market began to recover in early 2023. However, the recovery has been short-lived, as homeowners and buyers have recently faced renewed mortgage pain.

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The rise in mortgage rates in the UK is driven by several factors, including rising inflation and expectations that the Bank of England (BoE) will continue to raise interest rates to bring inflation under control. The BoE has expanded its base rate many times since December, and the central bank is still expected to increase the rates further to keep inflation under control.

Last month, the BoE hiked its base rate to 5%. The new rate marked its highest level in 13 years. Economists believe the base rate could rise to as high as 6% by the end of the year. The rate increment has caused mortgage rates to surge, making it more expensive for people to borrow money to buy a home. As a result, house prices have begun to fall, and the number of mortgage approvals has declined.

Experts Warn of Further Pain for Mortgage Holders in the UK

According to reports, experts are warning that the rising cost of mortgages could significantly impact mortgage holders. Danni Hewson, head of financial analysis at AJ Bell, an investment and stock broker company, said on Tuesday:

“Mortgage payers are marching towards fixed rate renewal dates with a sense of dread.”

She believes that the mood in the market is changing and that bad news is becoming more commonplace.

Another expert, Matthew Ryan, head of market strategy at global financial services firm Ebury, anticipates that the central bank will hike interest rates to around 6.35% within the first three months of next year.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division”

“Financial markets are pricing in a peak in UK interest rates of around 6.35% in the first three months of 2024, up from 5% currently,” he said.

Ryan also warned that this could have a massive impact on mortgage holders, as they will see their monthly payments increase.

What Does This Mean for Homeowners?
The rising cost of mortgages is likely to impact homeowners significantly. Those on variable-rate mortgages will see their payments increase as interest rates rise. While those on fixed-rate mortgages will not see their fees increase immediately. However, they will be locked into a higher rate when their fixed-rate period ends.

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Homeowners struggling to make mortgage payments should contact their lenders for possible solutions. There may be options to help them, such as a payment holiday or a remortgage.

By Chimamanda U. Martha

Source: Coin Speaker

Five-year mortgage rate hits 6% in yet more misery for homeowners

Marketing July 4, 2023 No Comments

The average five-year fixed-rate mortgage has risen above 6% for the first time since November last year. The typical rate across all deposit sizes was 6.01% on Tuesday, up from […]

The average five-year fixed-rate mortgage has risen above 6% for the first time since November last year.

The typical rate across all deposit sizes was 6.01% on Tuesday, up from an average rate of 5.97% on Monday, according to financial information website Moneyfacts.

It is the highest level since former chancellor Kwasi Kwarteng’s mini-budget in November.

Meanwhile the average two-year rate nearly surged past 6.5%.

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Nearly 90% of outstanding mortgages are on fixed rates – many of which were taken out when home loans were at 2% or less.

It comes as the Bank of England pushed the UK base interest rate to 5% last month, opting for a bigger hike than most economists were expecting.

It marked the 13th time in a row that the central bank has pushed up rates, in efforts to quell rampant inflation across the UK.

The Financial Conduct Authority watchdog will hold a meeting with HSBC, NatWest, Barclays, and Lloyds for a meeting on Thursday after bankers have been accused of dragging their feet in passing on interest rate rises to savers.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division”

Government minister Johnny Mercer said homeowners needed to ‘hold their nerve’ over inflation, telling Sky News ‘things will get better’.

Lib Dem MP and Treasury spokeswoman Sarah Olney urged the Government to do more in response to climbing mortgage rates.

She said: ‘This is yet more mortgage misery for homeowners on the brink.

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‘Rishi Sunak asking homeowners to hold their nerve is sounding more tin-eared by the day.

‘It shows this Conservative Government is just totally out of touch.

‘Conservative ministers sent mortgages spiralling through all their chaos and incompetence, now they are refusing to lift a finger to help.’

By Brooke Davies

Source: Metro

Rising mortgage costs driving house sellers to cut asking prices

Marketing June 28, 2023 No Comments

Vendors are increasingly willing to accept a sizeable discount from the asking price in order to secure a sale, research has found. Its latest research, property portal Zoopla found that […]

Vendors are increasingly willing to accept a sizeable discount from the asking price in order to secure a sale, research has found.

Its latest research, property portal Zoopla found that nearly half (42%) of sellers are accepting discounts of at least 5% from the asking price, the highest level seen since 2018. Meanwhile, 15% were accepting discounts of at least 10% from the asking price.

Zoopla pointed to rising mortgage costs for this trend, noting that mortgage rates moving above 5% had meant a hit of up to 20% in the buying power of those looking to purchase using a mortgage.

The higher mortgage costs are leading to a drop in demand, with Zoopla data showing there were 14% fewer buyers active in the market over the last four weeks compared with the same period a year ago.

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However, supply is growing, with 18% more homes listed for sale in the last four weeks compared with the five-year average.

The study also found that annual house price growth has slowed to 1.2% now, with Zoopla suggesting “a return to modest quarterly house price falls” over the second half of the year as a result of rising mortgage rates and continued cost of living pressures.

House price growth was highest in Wales at 2.5%, and weakest in Northern Ireland where prices dropped 0.8%.

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Region watch

Looking at regional differences, market activity was found to be holding up better in Scotland, the North East and London. Southern England and the Midlands have performed the worst, with Zoopla noting these were places where house prices grew the most during the pandemic.

It suggested that house prices will fall by up to 5% this year, though over the longer-term house price growth will be “ a lot weaker” due to a realignment of house prices and household incomes.

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Mortgage rates testing homebuyers

Richard Donnell, executive director at Zoopla, said the resilience of the market and particularly homebuyers is being tested by rising mortgage rates.

He continued: “Modest price falls will resume in the second half of 2023 as the supply of homes increases giving buyers more choice and room for negotiation on price. We still expect house prices to be 5% lower over 2023 and there is a very substantial equity buffer to absorb price falls which are likely to be concentrated across southern England.

“Demand for homes remains but those households looking to move home in 2023 need to be very realistic on pricing and get the view of agents on where to pitch their asking price to secure a sale.”

By John Fitzsimons

Source: Your Money

First-time buyer mortgage applications hit six-month high in March – First Direct

Marketing June 2, 2023 No Comments

The value of mortgage applications submitted by first-time buyers reached £8bn in March, the highest amount in six months, data from a bank has shown. The First Direct first-time buyer […]

The value of mortgage applications submitted by first-time buyers reached £8bn in March, the highest amount in six months, data from a bank has shown.

The First Direct first-time buyer trends report based on data from CACI revealed that the value of applications in March was also 42 per cent up on February’s £8bn.

However, despite the application value reaching its highest level since September last year, the first quarter of 2023 was down by 26 per cent compared to the same period in 2022. In March last year, the first-time buyer application value reached £10.8bn, marking a two year high.

Activity was more subdued in April as the value totalled £6.2bn, however, this was the second highest amount in six months.

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The mortgage market as a whole, including homemovers and remortgagors, reached a value of £26.6bn in March. This was the first time the value of applications passed £20bn since September last year, and it was also £8.9bn up on February.

Carl Watchorn, head of mortgages at First Direct, said: “Typically, March and April tend to be some of the busiest months of the year when it comes to first-time buyer activity. March usually sees a sharp spike in applications after what is often a quiet start to the year.

“It’s really encouraging to see the market recovering during March and April to a level of applications not seen since September 2022. A closer look at this data also reveals that the value of first-time buyer loans has doubled since Q4 last year; a segment fundamental for a vibrant housing market.”

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The average first-time buyer loan was £211,766 in April, which was an 8.8 per cent increase or more than £17,000 rise since the start of the year.

First Direct said it was also the highest figure since July 2022 when the average loan amount reached £212,153.

Loan sizes among first-time buyers saw the biggest jump, but average homemover loans also rose by 14,200 since January while there was a £9,500 increase in average remortgage loans.

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Watchorn added: “The news that average first-time buyer loans are increasing is likely indicative of increased confidence in the sector, although it does once again highlight the challenge faced by many young people trying to bridge the gap between average income and the average house price.

“It’s also important to consider that the average first-time buyer house deposit is now more than £60,000. Faced with higher rates than we’ve seen in a number of years, many buyers will be looking to save up as big a deposit as possible in order to secure a cheaper rate against a lower loan to value (LTV) product.”

By Shekina Tuahene

Source: Mortgage Solutions

UK interest rate rise: how will it affect you?

Marketing May 12, 2023 No Comments

The Bank of England has yet again hiked interest rates, in the 12th consecutive rise since December 2021. This time the increase is 0.25 percentage points – taking the base […]

The Bank of England has yet again hiked interest rates, in the 12th consecutive rise since December 2021. This time the increase is 0.25 percentage points – taking the base rate to 4.5%. So what does that mean for your finances?

How will mortgage payments be affected?
Thursday’s move is yet more bad news for the 2.2 million people on a variable rate mortgage. Roughly half are either on a base rate tracker or discounted-rate deal, with the remaining 50% or so on their lender’s standard variable rate (SVR).

A household with a tracker mortgage currently at 5.25% will see their pay rate rise to 5.5%. These deals directly follow the base rate. This means their monthly payments will rise by £21 a month, assuming they have a £150,000 repayment mortgage with 20 years remaining. Their monthly payments rise from £1,011 to £1,032.

The increase may not sound much, but as recently as last June that same household would have been paying £776 a month, meaning their payments have risen by a third in just under a year – equivalent to a £3,000 annual increase.

A household with a £500,000 tracker mortgage with 20 years to go will see their monthly payments rise by £69 to £3,439 a month as a result of the latest increase.

SVRs change at the lender’s discretion, but most will go up, though not necessarily by the full 0.25 percentage points. Some lenders may take some time to announce their plans, but householders can similarly brace themselves for higher payments.

If you are one of the 6 million-plus households with a fixed-rate mortgage, you are unaffected by the latest rise. This group of borrowers will only feel the pain when their current deal expires and they have to renew, which might be in anything between a few weeks or a few years.

And it could be about to get even more painful. The US investment bank Goldman Sachs warned this week that the Bank of England could be forced to raise interest rates to 5% this summer.

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What about new mortgages?
The last few months have been a fast-moving and stressful time for anyone looking for a new fixed-rate home loan, whether it’s to buy their first property or to replace a deal that is coming to an end.

The mortgage market has settled down a lot after the chaos of last September’s Truss government mini-budget, as witnessed earlier this week with the news that Skipton building society has launched a 100% mortgage deal, albeit one where you have to fix for five years at a higher-than-average rate of 5.49%. Standard no-deposit mortgages have not been available since 2008, in the immediate wake of the financial crash.

While new fixed-rate mortgage pricing is not directly influenced by the Bank of England base rate and is largely dependent on money market swap rates, Chris Sykes, technical director at mortgage broker Private Finance, said these have been “slowly edging up lately and are now around 0.3% higher than they were a month ago in April”.

On Thursday morning, the Principality Building Society was offering a five-year fixed-rate mortgage at 4.05% aimed at buyers not looking to borrow more than 75% of the property’s value. Meanwhile, for a first-time buyer of a £200,000 home with a £20,000 deposit, First Direct was offering five-year fixes at 4.44% for those looking to borrow 90%. Several other lenders have similar deals around the 4.45% mark.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

This is good news for savers, isn’t it?
When the Bank started raising interest rates back at the very end of 2021, the very best easy access savings rate was paying just 0.67%. The succession of interest rate increases have made things better for savers, but the highest-paying instant access account (offered by Chip) is still only paying 3.71% when the current rate of inflation is 10.1%.

In anticipation of Thursday’s increase in the cost of borrowing, several of the online savings providers have been upping rates in a bid to lure in customers. Those happy to lock their money away for a year can now receive 4.91% from HTB. Rates of around 4.9% can be found if you are happy to invest in a fixed-rate bond of two to five years’ duration. By contrast the highest paying five-year fixed-rate savings bonds in March were paying 4.6%.

In the past few weeks, the Commons Treasury select committee has been campaigning to get the big high street banks to increase the savings rates offered to loyal customers. While the online accounts above are paying fairly attractive rates of interest, easy access accounts at many of the big banks are still offering pitifully low returns.

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Will more people now get into arrears?

Frankly, yes. On Monday the consumer group Which? warned that an estimated 700,000 UK households missed or defaulted on a rent or mortgage payment last month. Which? said 3.1% of the home loan borrowers it surveyed had missed a mortgage payment last month.

Alastair Douglas, chief executive of the site TotallyMoney, says: “The advice is that if you are struggling, contact your lender and ask for support – and remember this won’t impact your credit rating. However, missed payments can – and they could stay on your credit file for up to six years. If these persist, you might end up in mortgage arrears, leading to court action and even repossession.”

What about credit cards and loans?
Expect higher interest rates on credit cards and pricier personal loans for new applicants. However, most unsecured personal loans have fixed rates, so if you already have one, your monthly payment will not change.

By Miles Brignall

Source: The Guardian

Skipton launches deposit-free mortgage aimed at renters

Marketing May 10, 2023 No Comments

A deposit-free mortgage specifically aimed at people currently renting has been launched by a UK building society. While a handful of other no-deposit deals are available, they all need the […]

A deposit-free mortgage specifically aimed at people currently renting has been launched by a UK building society.

While a handful of other no-deposit deals are available, they all need the financial backing of family or friends.

Skipton Building Society says while its deal requires 12 months of on-time rental payments and a good credit history, it does not need a guarantor.

However, at 5.49% the interest rate is more expensive than the average five-year fix of 5%.

Generation Rent, which campaigns on behalf of private renters, says the shortage of affordable properties within the budget of first-time buyers is still the main stumbling block for those struggling to get on the property ladder.

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“It’s not necessarily going to help all the people who are looking to buy a first-time home if there aren’t more houses available to buy,” says Will Barber Taylor from Generation Rent.

Currently there are 15 other zero-deposit products on the market, according to financial data firm Moneyfacts, accounting for just under 0.3% of the UK market.

First-time buyers are facing an uphill battle. Rapidly rising rents have made saving for a deposit increasingly difficult, at the same time that the government’s flagship Help to Buy scheme, aimed at helping first-time buyers, is no longer open.

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The Skipton, which is the UK’s fourth biggest building society, says it recognised a “gap in the market”.

Stuart Haire, the society’s chief executive, told the BBC that “until now there has been no solution for them [renters] to buy a property due to a lack of savings or access to family wealth”.

David is renting with his partner and new baby in North Yorkshire. “It’s getting that deposit together that’s really difficult with rent prices,” admits David.

“If I can prove I’ve been paying rent for the last 10 years of my life why can’t I have a mortgage.”

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The government’s Help to Buy scheme saw the Treasury lending homebuyers between 5% and 20% of the cost of a newly-built home, and up to 40% in London.

The scheme closed to new applicants in October 2022, but there are rumours that something along similar lines could be re-introduced.

But a rise in zero-deposit mortgages may not be welcomed by everyone, as riskier mortgages with a high loan to value were a root cause of the 2008 financial crash.

Mortgage expert Andrew Montlake says then lenders were just interested in volume rather than quality.

“The world is very different now,” he says, and adds that his opinion has changed over the past 15 years, as long as the 100% loan value mortgages are “underwritten sensibly”.

By Colletta Smith & Nicky Hudson

Source: BBC News

Leap in mortgage approvals signals market recovery

Marketing May 5, 2023 No Comments

Bank of England statistics show that agreed mortgages climbed to 52,000 in March, up from 44,100 the previous month. The total number of mortgage approvals has bounced back after hitting […]

Bank of England statistics show that agreed mortgages climbed to 52,000 in March, up from 44,100 the previous month.

The total number of mortgage approvals has bounced back after hitting a new low at the end of last year, Bank of England figures show.

Mortgages agreed jumped to 52,000 in March, from 44,100 in February, as the market recovers from the damage caused by the Mini-Budget.

The overall total though remains below the monthly average for 2022 of 62,700.

LOWEST SINCE 2009

Approvals for remortgaging with a new lender also increased, to 32,200 in March from 28,200 in February. The ‘effective’ interest rate on newly drawn mortgages increased to 4.41% in March.

Gross lending increased slightly from £20.4 billion in February to £20.6 billion in March, while gross repayments fell from £19.9 billion to £19.3 billion.

Statistics from the Bank of England released in January showed mortgage approvals fell to the lowest level since 2009 if the slump during the Covid pandemic period was excluded.

Approvals for house purchases dropped to 35,600 in December, from 46,200 in November. This was the fourth consecutive monthly decrease, and the lowest since May 2020.

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INDUSTRY REACTION

Tom Bill, head of UK residential research at Knight Frank, says: “The UK housing market continues its convincing rebound following the chaos of the Mini-Budget.

“Price declines appear to be bottoming out and transactions clearly hit their low-point in January.

Buyers have accepted the new normal for mortgage rates as stability returns to the lending market. Boosted by savings accumulated during the pandemic, record levels of housing equity and a strong jobs market, we expect sales activity will be solid without being spectacular this year.”

Tomer Aboody, director of property lender MT Finance, says: “Higher mortgage approvals in March show that there is slightly more confidence in the market, which is cemented by the Prime Minister’s push for lower inflation, and the markets predicting lower long-term rates than first indicated.

“However, while rising, transactions are down compared with before the pandemic so some assistance from the government to try to push volumes is now required.”

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Mark Harris, CEO of mortgage broker SPF Private Clients, says: “With mortgage approvals picking up again, it appears as though buyers are shaking off recent concerns about the wider economy and getting on with moving.

“The worst of the pain may not be over with another quarter-point rate rise expected next week as inflation proves to be more stubborn than the Bank of England expected.”

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Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “We regard mortgage approvals as a very useful indicator of future direction of travel for the housing market and these figures are no exception.

“Lending was in the doldrums, reflecting the quiet period between the Mini-Budget and the end of last year, whereas the approvals figures illustrate that stabilising mortgage rates and inflation is prompting an increase in activity.”

By David Callaghan

Source: The Negotiator

Mortgage products rebound with second highest monthly increase taking total to over 5,000

Marketing April 27, 2023 No Comments

Mortgage availability increased by 774 products in April to 5,146, the second largest monthly rise on record. It marks the first time the number has risen above 5,000 since May […]

Mortgage availability increased by 774 products in April to 5,146, the second largest monthly rise on record.

It marks the first time the number has risen above 5,000 since May 2022 and is the highest count since February 2022 when it stood at 5,356.

The only bigger monthly increase was October to November last year when 869 new products were launched, the data from Moneyfacts shows.

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There are now more than double the number of home loans on the market than October 2022 at the height of the mortgage crisis when rates rose sharply in the mini-budget fall out.

Higher borrowing costs as a result of the unfunded list of commitments made by Liz Truss’ government forced lenders to withdraw products from the market and push up interest rates.

From September to October the number of products dropped by 42 per cent to 2,258. In November they recovered slightly to 3,117.

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For higher deposit deals, available mortgages at 60 per cent loan to value in April increased by 45 to a total of 702, the highest at that borrowing ratio on Moneyfacts’ record.

For borrowers with smaller deposits there is also an increase in choice. The 85 per cent LTV product bracket saw one of the largest rises over the month and at 806 available deals the tier is at the highest level on Moneyfacts records.

But, there is a sting in the tail. Mortgage rates have nudged higher this month for both two-year and five-year fixed rates. It is the first time this year average rates have increased over a month.

The two-year fixed rate average across all loans is 5.35 per cent and the five-year average is 5.05 per cent – this is up from 5.32 per cent on two years and 5 per cent on five years in March.

At the same time the average standard variable rate is now 7.3 per cent, the highest level since February 2008 when it hit 7.31 per cent.

A standard variable rate is the rate a lender moves you to when your fixed or tracker mortgage expires. They track the Bank of England base rate plus an additional charge.

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Rachel Springall, of Moneyfacts, said: ‘Interest rate competition among lenders was mixed in the past month, however it is widely expected that fixed mortgage rates will reduce over the next few months, but this will be determined by fluctuating swap rates and lenders appetite for business.

‘Those borrowers with a large deposit or equity may be pleased to see the average rates at 60 per cent loan-to-value for a two-year or five-year fixed mortgage stand below 5 per cent.’

However, for those who coming off a two-year fixed mortgage and wish to refinance on the same term (60 per cent LTV) face a shock.

The average rate on a two-year fixed mortgage in April 2021 was 1.63 per cent, compared to 4.95 per cent for April 2023.

This significant rise in rates means that for a £200,000 mortgage over 25 years a borrower would have paid £812 a month two years ago would now pay £1,163 – an increase of £351.

Earlier this year a brief rates war between lenders saw some fixed deals dip to as low as 3.75 per cent. However, they have since risen again but there are still deals below 4 per cent on offer.

By Fran Ivens

Source: This is Money

UK mortgage approvals rise for first time in six months

Marketing March 29, 2023 No Comments

Collapse in demand for property may be bottoming out but no return to boom conditions, analysts say. Mortgage approvals rose for the first time in six months in February amid […]

Collapse in demand for property may be bottoming out but no return to boom conditions, analysts say.

Mortgage approvals rose for the first time in six months in February amid signs that the collapse in demand for property seen last autumn might be bottoming out.

Figures from the Bank of England showed that home loan approvals rose from 39,647 in January to 43,536 in February – reversing a downward trend in place since August 2022.

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But analysts said that with interest rates rising there was no prospect of the market returning to the boom conditions seen during the pandemic and its aftermath, with one predicting that activity would be 30% lower in 2023 than in 2022.

In a sign of the turbulent conditions seen during Liz Truss’s brief premiership last autumn, the Bank said net mortgage lending dropped from £2bn in January to £0.7bn in February, the lowest since April 2016 apart from when the economy was locked down during the Covid pandemic. It usually takes several months for approvals to be turned into actual home loans.

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Andrew Wishart, UK property analyst at the consultancy Capital Economics, said: “Reflecting the partial unwinding of the spike in mortgage rates following the ‘mini’ budget, mortgage approvals rose to their highest level for three months in February. However, with mortgage rates unlikely to fall much further in the near term, lending will remain weak. Our forecast is that approvals will be 30% lower this year than in 2022.”

The Bank – which raised official interest rates for an 11th successive time to 4.25% last week – said the cost of servicing a mortgage was rising. The effective home loan rate – the interest paid by a new borrower – rose by 0.36 percentage points to 4.28% last month.

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Martin Beck, chief economic adviser to the EY Item Club, says: “The latest household lending data indicated continued weakness in housing market activity, albeit with signs that the worst may be in the past.” Approvals were still well below the average of 62,677 recorded in 2022, he added.

The Bank of England’s monthly money and credit report also showed consumers borrowing more in order to finance their spending. Consumer credit rose by £1.4bn in February – split almost evenly between credit cards and other forms of borrowing.

By Larry Elliott

Source: The Guardian

Industry reacts to ‘disappointing’ yet ‘inevitable’ base rate rise

Marketing March 23, 2023 No Comments

While coming as little surprise to most, today’s base rate rise to 4.25% has still been met with disappointment, along with some resignation as to the predicted direction of travel. […]

While coming as little surprise to most, today’s base rate rise to 4.25% has still been met with disappointment, along with some resignation as to the predicted direction of travel.

The general feeling is that, although less than the 50 basis points rise seen in February, a rise was inevitable given the inflationary uptick in February and the US central bank rise yesterday.

There’s concern for those on variable rates, but with a flurry of lenders having reduced fixed rates this week, it’s felt the predicted base rate rise has been factored in and little impact will result in that area.

Bluestone Mortgages sales and marketing director Reece Beddall says: “While today’s decision is clearly in response to inflation’s surprise jump to 10.4%, it will be a tough pill for consumers to swallow, nonetheless. Interest rates have risen consecutively for almost a year, pushing mortgage repayments higher still and putting a chokehold on people’s personal finances. Affordability challenges will no doubt remain for the foreseeable future.”

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Moneyfacts finance expert Rachel Springall comments: “A rise to base rate will come as disappointing news to borrowers who are not locked into a fixed rate mortgage. The incentive to fix is clear from the continued rise to the average standard variable rate, which is now above 7%, a level not breached since 2008.”

Also expressing disappointment, London estate agent and former RICS chairman Jeremy Leaf adds: “There is a close call between change and no change – this latest rise in rates is a huge disappointment for the housing market as we were hoping the bank would trust in its own data and leave well alone.”

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Stonebridge chief executive Rob Clifford described the rise as a ‘racing certainty’ but doesn’t expect big changes to follow.

“Once it was revealed that inflation had risen to 10.4% in February, followed by the Fed’s decision to raise rates yesterday in the US, it seemed like a racing certainty the MPC would have to act today with a further bank base rate rise.

“The markets have already been reacting to that news with swap rates increasing, and by this morning that rate rise already seemed priced in. My feeling is that the search for business – particularly from the mainstream, high-street lenders – will continue to keep mortgage rates round about where they are,” he says.

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Just Mortgages operations director John Philips adds: “Although the base rate has gone up, we have seen mortgage prices falling in recent months and customer enquiries to our brokers across the country have been remarkably robust since the start of the year.”

A possible outcome could be more demand for rental housing, says IMMO real-estate platform co-founder Avinav Nigam.

“The result of this is more demand for rental housing, and therefore a greater need to put time, money and effort into improving our private rental sector housing stock,” he comments.

By Linda Ram

Source: Mortgage Strategy