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September market update
Here we are again! As always it’s been a busy month, and we’re here to condense all that property news into bite-sized pieces for you. Today let’s chat frozen interest rates and house price cuts.
Let’s talk interest rates and inflation
Experts couldn’t predict which way the Bank of England would go with interest rates this month, but September 22nd saw the Bank of England deciding not to raise interest rates, holding them at 5.25%. It was the first pause following 14 consecutive rises since the mini-budget of December 2021, which destabilised the market. For several reasons, but mainly because of the decrease in inflation. The BoE were raising interest rates to combat inflation, and as price rises have slowed, they decided to signal that they’re close to the peak of interest rates. They hope that more rises will be unnecessary in the coming months too – but that's not a guarantee. So we'll just have to wait and see. Mortgage rates have soared since the end of 2021, but have been gently slowing since this summer. Why? Firstly, because banks like NatWest, TSB and Nationwide have entered into a kind of “price war” where they’re keen to undercut each other to attract more business. These banks and building societies have announced cuts this week, with several lenders offering new 5-year fixed rates below 5%. Secondly, as many people are striving to pay off their mortgages as soon as possible (because of unaffordable mortgage rates) it means banks have less debt in the bank and can therefore make less interest on it. Lowering mortgage rates should incentivize buying. Why have they paused rising interest?
What does this mean for homeowners with mortgages?
While there’s been no interest rate raise this month, many have been hit hard by rising interest rates over the last two years. If your mortgage deal is coming to an end, or you're thinking of taking out a mortgage for the first time, could now be a good time to get a fixed-rate deal? The truth is, interest rates have been unpredictable recently and it's always good to talk to your lender or broker. You can lock in a new rate up to 6 months before the current rate is due to end, and if rates go even lower you aren't tied in. So definitely start doing your research. Should I remortgage now?
House prices get a cut
New statistics from Rightmove show that more than 36% of properties sold since the summer have had to have their price cut at least once. This is the highest rate of market price deductions since 2011, with the pre-pandemic average sitting at 31.2%. The average price reduction is reported as 6.2%. So if your house was originally put on the market at £288,000 (the average price for a property in the UK in June 2023), that could have meant a reduction of £17,856 (6.2%) to £270,144. House prices drop as the market cools. In this case, the cooling came from too much supply and not enough demand. This may be because many wanted to sell because they could no longer afford their mortgage repayments once they increased in line with interest rates, or because of the cost of living crisis — but high borrowing costs also put off buyers, which can be a big factor. Plus, many first time buyers also no longer had the funds to put down a deposit because of the cost of living crisis. If a seller isn't in a position to wait for the price they want, they may have found reductions were their only option — especially if they're looking for a quick sale. Why is this happening?
That depends on you. Most of us sell to upgrade — and if you’re looking to sell and buy another property, you may see house drops across the board. So even if you have to reduce your selling price, you could expect to see the house you had your eye on dropping in price too. This means selling right now doesn’t have to be a bad idea. Plus, there are huge variations from region to region and even in between different types of property — so it's always worth having a look at what's going on in your area. Does this mean I shouldn’t sell?
Conclusions
Holding interest rates at 5.2% means we can begin to take stock of what’s going on, without the impending doom feeling that everything will slip from your grasp at the next BoE meeting. So that's something! But, as for both the Bank of England and house prices, we'll just have to keep an eye out and keep you posted. Whatever this next month brings, remember you can always reach out to find the best deal for your exact situation. See you next month!
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