The Monetary Policy Committee of the Bank of England (BoE), has raised interest rates a total of 9 times since December 2021 in an attempt to curb inflation. Now inflation appears to be levelling, it is widely expected that the current BoE base rate of 3.5% will increase to around 4.5% this year, a significant improvement on the 6% that was being predicted towards the end of last year.
Lenders appear to agree with the improved market sentiment, offering cheaper fixed rate options as they become more confident that rates do not need to increase quite as far as first feared. For example, Nationwide have recently reduced its mortgage rates by up to 0.60% with a number of other lenders following suit.
A reduction is mortgage borrowing rates would provide a major boost for many would be homeowners and existing clients looking to remortgage. Many potential borrowers had been forced to review their plans due to the increased costs in recent months.
Former housing analyst Anthony Codling of Twindig, says of the current situation:
“The Bank of England has revealed that mortgage rates fell in December. If we combine the impact of falling mortgage rates and softening house prices, many would-be homebuyers may find themselves priced back into the housing market suggesting that despite challenges elsewhere in the economy, it’s not all doom and gloom.”
While this is welcome news, it does not hide the fact that there is still trepidation in the market. Mortgage approvals have fallen to their lowest level in 2 years. The BoE reported that approvals dropped to 46,000 in November, a significant decrease from the 58,000 only a month earlier and another factor weighing down on house prices.
Andy McBride, director at Professional Contractor Mortgages has this advice for clients:
“On the face of things, it appears we are starting to see improvement following the fallout from 2022. I always get asked if “now is the right time to buy?”. No-one can answer that question for you and many so-called experts have tried and failed to time the market”
“If you are looking to get on the market, there is a fine balance between waiting for optimal house prices and delaying too long and finding interest rates have increased. My advice is to engage with a qualified mortgage broker and start to build out a plan that works for you without being based on hopes of reduced rates or house prices.”