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Your June market update
Interest rates, house prices, and more. It's been another busy month — but we're here to talk you through it.
Another month, another series of mortgage headlines. The 13th rise in the UK’s Bank Rate was announced on Thursday, leaving many of us wondering - how does this affect my mortgage? In this month’s newsletter, we’ll break down the realities of rising interest rates, dropping house prices, and what it actually means for you.
Thursday saw the 13th rise in interest rates in a row by the Bank of England to 5%. This gradual but hefty shift (from the 0.1% rate in December 2021) is part of the government’s plans to reduce inflation and bring down the cost of living. The collateral damage though? Rising interest rates means the cost of borrowing is getting more expensive. Whether you’re remortgaging or looking to get on the housing ladder, this can be more than a little worrying.
Despite pressure to offer help (in the form of an emergency fund) to households across the country who fear the rising cost of borrowing, Rishi Sunak has announced that he is sticking to his plan of reducing inflation as the number one priority.
Interest rate rises
How will this affect borrowing?
Even before the interest rate rise, mortgage rates were in the news recently. That’s because the average rate on a 2-year fixed-rate mortgage has risen to 6.01%, from 5.98%. UK Finance have estimated that 2.4 million deals will come to an end in 2024, meaning many will face a hike in interest rates that could be unaffordable — many are calling this a wave waiting to crash. You will probably remember the fated mini-budget of 2022, and the ensuing removal of affordable mortgage deals from the market. Well, experts fear this will happen again, with banks like HSBC, NatWest and Nationwide already beginning to pull cheaper deals from the market. If this is all feeling a little familiar, you're not wrong. Mortgage deals disappearing feels very last year — but here we go again.
That depends on your position. We’ve done an entire post about the latest rise and what it might mean for you, but it’s always important to do your own research and talk to an expert (we always recommend talking to a mortgage broker). It also depends how you're feeling about buying or selling — which brings us to house prices.
What should you do?
What this means for house prices
The rising interest rates has “slammed the brakes” on house price growth, according to This is Money. The average asking price from new sellers to the market dipped by £82 in June, taking the average asking price to £372,812. This time of year usually still enjoys a hot and healthy market following a bustling Spring, but the house price reduction indicates that this year’s “summer slowdown” has come a little early. Some are predicting crashes, while others are predicting moderate slowdowns — we’ll have to wait and see.
The unaffordability of borrowing and subsequent higher mortgage rates means that buyers tend to be less willing and able to borrow money. This then reduces their budget (because they have to put more aside for monthly repayments) and so causes house prices to dip.
If you’re a first time buyer, you may find that even with the rising cost of borrowing, a reduction in house price means that your house-buying goals are still within reach. It’ll be down to you.
Long story short? This was a big, scary month for mortgages — there’s no denying it. Whenever deals start disappearing from the market, it can be worrying for anyone who has a mortgage or is thinking about getting one. But if inflation is persistent, we’ll have to wait and see where this will go and how house prices may be affected. We can’t predict the future, but we can promise to be with you every step of the way.
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