Mixed mortgage signals this summer

As we head into summer, the weather is certainly starting to hot up. Will the housing and mortgage markets do the same?

On the one hand, the total number of residential mortgage products has risen above 5,000 for the first time since May 2022¹, a sign that certainty is much stronger in the mortgage market than it was in the months after the government’s ‘mini-budget’ in August 2022.

Likewise, agreed sales recorded its least negative reading since July 2022 in the May Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS).

Prices still to fall?

On the other hand, house price growth dipped in April following a strong showing in March, which put a stop to three consecutive months of growth². It remains to be seen which way the market will veer in the second half of 2023, but analysts are still predicting a fall towards the end of the year.

If, as many are predicting, a flurry of mortgaged homeowners are forced to sell up when their current fixed-term deals ends, the market could see a boost to supply that might reinforce the downward price movement. Analysts suggest that first-time buyers (FTBs) could be delaying their homebuying plans in the hope that mortgage rates or house prices are about to fall sharply.

Bank Rate rises again

Meanwhile, the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) is continuing to increase Bank Rate, with the latest quarter of a percentage point rise in May taking it to 4.5%. Various mortgage lenders increased the rates of new deals towards the end of May, following release of the higher-than-expected inflation figures. Nationwide was one such lender, increasing rates on new fixed rate borrowing by up to 0.45 percentage points. A Nationwide spokesperson said of the increase, ”In the current economic environment… this will ensure our mortgage rates remain sustainable.” Other major lenders also upped their rates last week. Borrowing costs are now at their highest level since October 2008.

In addition to product rate increases, fewer mortgages are on the market, with some lenders choosing to withdraw products.

Those with tracker or variable rates have seen immediate higher repayments but the impact on fixed-rate deals has been less pronounced, with several lenders leaving rates unchanged. With inflation still running at 8.7% in May, according to the latest official figures released by the Office for National Statistics (ONS), experts are predicting that Bank Rate could be increased again in June.

Whatever happens

After a turbulent year, uncertainty remains in the housing and mortgage markets. Whatever your position – and whatever happens in the months ahead – we’ll be here to help and advise.

Your home may be repossessed if you do not keep up repayments on your mortgage

¹Moneyfacts, 2023, ²Halifax, 2023