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Your May market update

Interest rates rise again and growth slows — but is a Canada-style model on the table for first time buyers? We have it all in your May market update.


Every month we cut through the jargon and talk you through the news that has been making property headlines – and, most importantly, what it all means for you.

This month the headlines have been buzzing with the news that the housing market is starting to show early signs of cooling off. While experts have been predicting this for months, the housing market has remained surprisingly resilient – but this month things may be starting to change. This news also comes as the Bank of England announces its decision to raise interest rates, in a bid to deal with rising inflation. Oh, and Michael Gove is looking at a Canadian model that may help first-time buyers. Basically, there’s a lot happening. 

But what does all this mean for those of us who are hoping to sell in the coming months? Or those of us who are looking for a new mortgage deal? Well, look no further because we’ve got you covered. Welcome to your May market update.  

Price growth starts to cool — finally

While April started off with bang: house prices soared to record heights and demand was as high as ever, this May the temperature of the housing market is looking distinctly cooler. As our regular market update readers will know, a market cool-off has been on the cards for some time now. But with the continued trend of a high demand for housing, met with low housing stock, the market has remained buoyant – against all the odds. This May, however, the rate of growth is – slowly but surely – starting to slow down.

According to Halifax’s monthly property index, by the end of April the rate of growth was down from the 1.4% increase we had seen in March. Now, to be clear, there was still growth — but the rate of growth was slowing.

“We continue to expect the housing market to slow in the quarters ahead,” Robert Gardner, the chief economist at Nationwide, told the Guardian. “The squeeze on household incomes is set to intensify, with inflation expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high.”

That being said, if housing prices are starting to cool then it’s still at a surprisingly slow rate, and the market continues to be unexpectedly buoyant given the pressures of the wider economic situation. 

“Housing transactions and mortgage approvals remain above pre-pandemic levels, and the continued growth in new buyer inquiries suggests activity will remain heightened in the short-term,” Russell Galley, the managing director of Halifax has suggested

So, what does all this mean for prospective buyers and sellers? 

Well, it looks like the uncertainty of the last few months is set to continue. And with the Bank of England’s decision to raise interest rates in early May (more on this later) along with the mounting pressure that the cost-of-living crisis is placing on household budgets, it seems likely that this downward trend will continue throughout the coming months. 

This increase will mainly affect those of us who are looking for a new mortgage deal or coming to the end of an existing fixed-rate mortgage deal."

Interest rates rise to 1%

The Bank of England has been dominating headlines again this month with news of their decision to raise base interest rates to 1%, as a means of tackling rising inflation. This is the fourth increase that the Bank has made since the beginning of December, and while there is a lot of talk about how this announcement has implications for mortgage rates, it may not be instantly clear exactly who will be affected. So, let’s break it down.

This increase will mainly affect those of us who are looking for a new mortgage deal or coming to the end of an existing fixed-rate mortgage deal. It is estimated that this rise in interest rates will add around £300 a year onto a 2.25% variable mortgage deal of £200,000. It also looks like rates may continue to rise, with another announcement from the Bank of England expected in June. But what does this mean if you’re looking to secure a mortgage in the coming months?

Well, experts are advising those coming to the end of a fixed-rate mortgage to start shopping around as soon as possible. Financial adviser, Scott Taylor-Barr, from Carl Summers Financial Services, says that this would ideally happen around three months before the end of your current mortgage deal. So, if you’re looking for a new fixed-rate deal it might be a good idea to start looking. 

One little flicker of interesting news — Michael Gove is reportedly looking at a new model of home ownership that helps first time buyers. This model, already popular in Canada, allows first-time buyers to buy with smaller deposits if they take out an insurance policy. Ideally, smaller deposits means buyers can get on the housing ladder more quickly — but these are very early reports, so there’s nothing to get too excited about yet. We’ll let you know if this moves from newspaper rumblings to real action.  

So, with the housing market cooling and with mortgage rates rising again, it looks like this period of instability is set to continue. It’s still impossible to predict what might happen next in this changeable climate, but one thing you can rely on is that we’ll be here to keep you updated on all the developments. We’ll see you next month to talk through what happens, as it happens.