Mortgage Market Overview – May 2023

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Published on 2 June 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 4.50% (Increase 0.25%)

Market Overview

Well, what a difference a month makes! 

“Volatility and uncertainty”

The Bank of England raised interest rates at the beginning of the month by 0.25%. This is the 12th rise since December 2021. Inflation has fallen slightly but remains high, which is impacting the cost of living. This is mainly driven by the increasingly high food and energy costs. The announcement of the energy price cap reduction should help ease the pressures, but the Bank of England continue to push up the cost of borrowing to try and stem the rise of inflation. 

As mortgage lenders reassess their propositions in anticipation of further rises from The Bank of England, we continue to see a steady increase in lender interest rates across the board, this is due to volatility of the market as lenders try to factor in the bank rate increases amongst the continued uncertainty of the market.

  • In April, the headline rate of inflation fell less than expected, from 10.1% to 8.7% BUT food prices were 15.4% higher than the same period last year, (according to the British Retail Consortium)
  • Swap rates (the benchmark interest rates used by banks when they lend to each other) jumped following data from the consumer price index.
  • Speculation the bank rate may rise further to 4.75% when the new figure is announced on 22nd June.
  • The most competitive mortgage deals whilst writing: 4.40% for a two-year fix, 4.10% for a three-year, and 4.04% for a five-year.
  • Zoopla reports average UK house price dropped 1.3% over the last 6 months, but the rate of price falls has slowed as activity levels recover.
  • Expectation that the price cap on energy costs currently £2,500 and due to fall £2,074 from 1st July will help to slow the surge in inflation.
  • Housing demand recovering with mortgage approvals rising to 33% which is below pre-Covid average in February which is up from 41% below in January.

“While a reduction in Bank Rate would have been welcome news, it feels as though another increase is necessary to combat stubbornly high inflation and help bring back some much-needed stability. Hopefully, this will be the last rise before we start to see a plateau.”

Biggest Challenges

  • Challenges for mortgage lenders setting interest rates – Last minute interest rate changes.
  • Mortgage affordability restrictions   
  • Inflation, cost of living – uncertainty
  • Rent increases – it’s “cheaper to buy than to rent” in most areas of the UK.

Mortgage News

  • Skipton launched 100% mortgage available to first-time buyers who have paid their rent for at least 12 months – current interest rate 5 year fixed 5.49%.
  • Rumours the Government are looking to re-introduce a “new type of help to buy” watch this space…
  • Nationwide launched 0% Green additional borrowing products for existing borrowers to help with energy-efficient home improvements.
  • Buckingham Building Society launched fee-free mortgage products for shared ownership.  
  • Halifax lifts LTI (Loan to Income) cap to ease affordability pressures and EPC ratings are being collated for purchase applications with cashback offers on “Green mortgage products”.
  • Leeds Building Society launched “Experian Boost” to help improve credit scores for aspiring buyers by using open banking. It’s designed for “single applicants” with a good track record of keeping up with regular payments, such as council tax and streaming subscriptions. Plus, improved affordability for “Energy efficient homes” (EPC rating of A or B).
  • Hanley Economic Building Society is currently offering a 4.89% five-year fixed maximum LTV of 95% for first-time buyers.

Dates for the Diary

  • EPC price cap changes to £2,074 from 1st July to 30th September 2023. With a further reduction predicted from 1st October.
  • The next Bank rate decision will be announced on 22nd June 2023,

Whilst mortgage rates have increased there is still a good choice of deals in the market to choose from. We will continue to see lender innovation around EPC and “Green Mortgages”. Market predictions are that prices may be set to begin recovering in the latter half of 2023 and before the general election. As it’s likely that housing will be at the top of the agenda.

With last-minute interest rate changes and affordability challenges, never has there been a more important time to speak to a “trusted mortgage broker”. Knowledge is key, and here at 177 Mortgages, it is important to us that we stay one step ahead of any market changes. The team at 177 Mortgages are available 7 days a week, Monday – Friday 9.00 – 6.30 pm & Saturday & Sunday 10.00 – 5.00 pm. Get in touch today on 0800 098 7177 or book a call back.

177 Mortgages and 177 Protect are open 7 days a week. We’re always happy to talk through your mortgage, specialist finance and protection needs in more detail. If you’d like to book an appointment or simply find out more information, please get in touch.

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