Mortgage Market Overview – July 2023

Published on 31 July 2023

Stay up-to-date on the latest mortgage market trends and industry news with our monthly updates. Our team of expert advisors provides insightful analysis and expert commentary on a range of topics, including mortgage rate trends, housing market forecasts, and industry updates.

Bank of England Base Rate 5.0% (No MPC meeting during July)

Market Overview

A “better than expected” fall in inflation figures gives hope to a smaller rise by the Bank of England than had previously been reported. The next decision is due in a few days and experts predict that the Bank of England will increase the base rate by 0.25% to 5.25% (0.25% lower than had previously been predicted.)

Whilst most recent inflation news is positive and shows some signs of easing, underlying inflation remains high overall with past rate increases continuing to be transmitted financing conditions tightening it is dampening demand.

  • Reports forecast that peak interest rates to fall from 6% to 5.75%.
  • Volatile swap rates start to ease. (Swap rates are the rates banks lend to each other and a marker for fixed-rate mortgage rates)
  • Fixed-rate mortgages have dropped for the first time since May, offering some optimism to the market. Rates have fallen by as much as 0.40 percentage points, with some deals dipping below 6%.
  • The best two-year fixed today stands at 5.53%, having fallen from 5.59% yesterday, while the leading three and five-year deals cost 5.64% and 4.74% respectively.
  • The number of UK residential transactions was 94,690 in June, 9% lower than in June 2022 but 28% higher than in May.
  • Higher mortgage rates impact home buyer demand but agreed sales are only down by 17% as more committed buyers and sellers are in the market. (Zoopla)
  • Weaker demand and rising supply have slowed house price inflation to +0.6% (Zoopla)

Biggest Challenges

  • Cost of living (Rising food costs)
  • Lender affordability and loan-to-income caps
  • Adverse credit
  • Rising rents
  • Lack of support for first-time buyers

Green Shoots?

Reports of some buyers returning to the market, as the market acclimatises to the “new normal” interest rates. And the added bonus of the unexpected drop in inflation starting to restore a little consumer confidence.

Mortgage News Snapshot

“Rate reductions from major providers bring optimism to market” (28th July 23)

  • Increased product innovation from Building Societies
  • 5% deposit – The Cumberland Building Society launchFirst-time buyer 95% LTV 5-year fixed rate at 5.98%
  • 40% deposit – The Cumberland Building Society launch a 5.28% 5-year fixed.
  • TML (The Mortgage Lender) using net profit, increased corporation tax doesn’t impact lending. They will work from the latest 12 months trading figures and are available to 85% LTV

Dates to be mindful of

  • The next Bank rate decision will be announced on 3rd August 2023.
  • EPC price cap changes from 1st July to 30th September 2023 £2,074 with a further reduction predicted from 1st October.

Further falls in the overall inflation rate are expected for the rest of 2023, as prices rise less quickly. The Governor of the Bank of England said that this was largely due to falling energy prices. Economists are forecasting that it will have fallen to 5.0% by the final quarter of 2023.

Mixed messages as July has been a month of two halves. With last-minute rate hikes, tightening affordability and restricting Loan to Income caps. To News of swap rates starting to ease and lenders reducing rates. This could bring a little calm to the market as the majority of lenders tweak interest rates in anticipation of next week’s base rate review.  

As always, the team are on hand 7 days a week to answer any queries you have. And remember our advice is free. Get in touch today on 0800 098 7177 or book a call back.

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