Mortgage market is still kicking
Recent announcements from a clutch of lenders – Santander, Barclays, Nationwide and Halifax – point to a further reduction in rates to average around 4.5 per cent, with lenders offering the lowest rates to lower loan-to-value borrowers who pose less risk.
The mortgage rate cuts by some of the biggest commercial retail lenders provide proof that the market is potentially going to become more attractive and more affordable for domestic and first-time buyers – and not just to overseas or cash buyers as was the case when rates hit their recent highs.
Despite some media hype that banks are reducing their overall mortgage lending, there is still an appetite to lend.
A lot has happened in short space of time. The Bank of England’s benchmark lending rate had nine consecutive hikes in the year to December 2022, rising from 0.25 per cent to 4.25 per cent – its highest level for 14 years.
The obvious corollary has been a lull in market activity and the start of a decline in property prices, which may or may not accelerate in the coming months.
But much of this has seemingly been digested by the market, leading to stabilisation as people are beginning to accept the ‘new norm’ in interest rates. After a series of shocks, there is instead a greater sense of calm and equilibrium. Also industry professionals can now more confidently gauge and advise on where rates may end up in the medium term.
It should not be forgotten that whenever the UK property market is reported to be down, history shows that it is never down for too long. If buyers have available funds or funding, they should press ahead and not potentially lose out on properties that they really like and want.
Good property stock is not always around; in busier markets, people tend to lose out thanks to an increased level of competition. The only people still waiting should be those who are not yet financially able to buy.
There is an important caveat in this assessment: growth in real incomes.
Since interest rates are still relatively high, at least in the context of recent history, the market may well remain more attractive to overseas and cash buyers until UK incomes begin to increase in real terms, adding to the purchasing power of domestic UK buyers.
Goli-Michelle Banan is head of residential real estate at solicitors Lawrence Stephens
