Inflation Down, Rates Still to Rise?
The markets and in particular Mortgage lenders were watching closely today as the latest inflation figures were released by the Office for National Statistics.
Inflation in the UK dropped to 6.8% in the year to July from 7.9% in June. It is the second month in a row that inflation has dropped sharply, with price rises now at a 15-month low.
Fixed rate mortgage products are on a downward trend, and all six of Britain’s biggest mortgage lenders, including Lloyds Banking Group and Nationwide, have reduced their rates in the past week.
It is likely that today’s inflation data will bring further stability to the mortgage market and should support further reductions in rates offered by lenders.
Markets Positive but Cautious
Although we have recently seen a positive trend in the number of lenders making cuts to their rates, the markets still expect another interest rate rise with markets now pricing in a Bank Rate peak of six per cent meaning we are highly likely to see a further rise of 0.25 percentage points in September.
“With potential for further base rate rises, and the continuing fluctuation of other factors that influence the rates offered to buyers, it is difficult to predict if we have reached a turning point,” says Moneyfacts.
Safety Conscious Approach
We are still recommending borrowers take action to secure a rate now and then keep it under review, to see if a switch to a better rate becomes possible in time.
Our “Flexi Lock”service was designed to ensure we secure the best rate for our clients up to 6 months in advance of their fixed rates coming to an end, this then gives us the time and flexibility to move to a lower rate product if one becomes available.
Borrowers on Tracker Mortgages
If you are on a tracker or standard variable mortgage you would have experienced consistent rate rises and you’re likely to be on noncompetitive rates. We encourage you to get in touch with our mortgage brokers who can conduct a review of your current situation and explore the potential for a more competitive deal.
For mortgage help and advice please feel free to contact our team on 0208 364 3444 or click here to schedule a free consultation call.
Home buyers prices out of the capital
High mortgage rates are pushing Londoners —particularly first-time buyers— out of the capital, as buyers look to reduce their borrowing costs by choosing more affordable properties.
New data from Hamptons shows that Londoners bought 32,600 homes outside the M25 so far this year, which represents 7.7 per cent of all property sales outside the capital.
First-time buyers make up a record 30 per cent of those leaving London this year, spending an average of £429,800 on their properties. This is £96,590 less than they would have spent on a home in London, on average.
The main reason for this exodus of first-time buyers is soaring mortgage rates. Last month, two-year mortgage rates rose to their highest point since 2008, to 6.7 per cent. The average five-year rate also increased to 6.17 per cent.
Warning for Interest-only mortgages
Some mortgage borrowers who only pay the interest on their loan are being “overly optimistic” about their ability to clear their final debt, data shows.
Interest-only deals require borrowers to have a plan to pay off the loan – known as the capital – at the end of the mortgage term.
But research by the Financial Conduct Authority (FCA) suggests some people do not realise they face a shortfall.
The warning comes as rising costs mean interest-only deals may become popular.
More than eight in 10 (82%) of interest-only customers were confident in their ability to cover the final cost of the mortgage, the FCA survey found.
While 36% said they might have a shortfall in funds when it came to making the final payment,the FCA estimated that the actual figure was likely to be 46%.