May Mortgage Update: Is It Safe to Invest?
Looking to buy a new home in the near future – hold up, we’ve got just the update for you!
Looking to get ahead on the upcoming decreases? You’ll want to work with an expert to time it right, so get in touch – we’ve got just the person for the job!
The mortgage landscape is pretty rocky at the moment, with shocking increases in remortgages that have families tightening their belts across the country. But where does this leave buying and selling?
House Prices: Current Stagnation and Future Forecasting
Property is a go to investment for one very simple reason – it’s a pretty safe investment. Safe as houses, right??!
If you invest in property, you are far more likely to make money than lose it over time. However, property is a LONG TERM investment. Things can stagnate or even dip, but the hope is that over time, you will see a return on your investment.
Which leads us to the house price news: According to Halifax, the average UK house price had risen by 0.1% in April 2024. A typical UK home is now valued at around £288,949.
Amanda Bryden, who is Head of Mortgages at Halifax, said the housing market was “finding its feet in an era of higher interest rates”.
She acknowledged that borrowing costs are more expensive now than a few years ago, but their research indicates that “homebuyers are gaining confidence from a period of relative stability.”
While Halifax acknowledged that house prices have been largely flat so far this year, estate agent Savills forecasts that house prices will increase by more than a fifth by the end of 2028. Savills forecast has been updated based on expectations of a stronger performance from the UK economy and steady cuts to interest rates.
So, if you are worried about stagnating house prices and the ‘flat’ time we’ve seen so far this year, it seems this is only a short term concern, if Savills forecasting is correct.
This is why property is considered a relatively ‘safe’ investment, as it does weather the economic storms and holds its value in tough times, before continuing to rise.
Mortgage Update
So, if you’re thinking about purchasing a property, whether you’re a first time buyer or looking for up or downsize from your current home, maybe you need to think about doing that BEFORE the increases that Savills predicts.
So let’s take a look at what the mortgage market has to offer, while prices are holding steady…
The Bank of England had their usual meeting about interest rates on 9th May, and decided to hold the interest rate again at 5.25%.
Interestingly, of the nine members of the Monetary Policy Committee – which makes the decisions about the base rate – seven voted to hold, and two to cut. The fact that two members were looking to cut the base rate could be a good sign.
The Bank of England’s governor Andrew Bailey wants to “see more evidence” of falling inflation before cutting the base rate. The Bank’s inflation target is 2% and while it has fallen, it’s still above target at 3.2%.
On the bright side, Bailey is “optimistic that things are moving in the right direction”, so fingers crossed we see a cut in the base rate, maybe by the end of the summer or into the autumn.
As Amanda Bryden said, borrowing costs are more expensive now than a few years ago, so make sure that you are paying close attention to your budget to ensure that you can afford all the adjacent costs of getting a new (or first time) mortgage.
Sadly, you are NOT going to find a deal to rival what was available just 2-3 years ago. But, whereas the mortgage market was sluggish last year thanks to the regularly increasing interest rates, we are now seeing a lot more activity and demand, which is good news, with mortgage approvals hitting their highest point in 18 months.
However, in order for this to happens, buyers have had to ‘adjust their expectations’. As Amanda Bryden from Halifax says:
First-time buyers in particular [are] compensating for higher borrowing costs by targeting smaller properties. We see this reflected in property prices for the first few months of this year, with the value of flats rising most sharply, closing the ‘growth gap’ on bigger properties that’s existed for most of the last four years.
So despite the tricky financial times we find ourselves in, there IS momentum and you CAN still find yourself a new home. You just need to make sure you have the right advice, so if you haven’t got a relationship with a broker yet – what are you doing?! Get in touch, whether you’re a first time buyer, looking for your next home or just trying to find the best remortgage deal possible, we can help you out.
What do you think about the plateauing of house prices so far this year? Are you worried about your investment or are you looking to take advantage of them and move before they rocket up again?
