Following the significant increase of mortgage rates in September, we are finally seeing a fall in these rates. This is a result of lenders feeling more confident that market conditions have stabilised.
Since December 2021, the Bank of England has raised the base rate nine times which has clearly had an impact on mortgage borrowing costs.
In attempt to cease the inflation, we saw the base rate hit 3.5%. It is now expected that the base rate will peak at approximately 4.5% this year despite many analysts predicting that the rate will hit 6% at the tail end of last year.
Subsequently, lenders are now offering cheaper fixed-rate mortgages as they become more confident that the base rate rise this year will not be as severe as previously feared.
Nationwide, for example, has reduced its mortgage deals by up to 0.6% in recent weeks. Other lenders are expected to follow suit.
Falling mortgage rates is a huge improvement for many would-be home buyers, especially if they have had to put their buying plans on hold.
Former housing analyst, Anthony Codling, of Twindig, said: “The Bank of England has revealed that mortgage rates fell in December. If we combine the impact of falling mortgage rates and softening house prices, many would-be homebuyers may find themselves priced back into the housing market suggesting that despite challenges elsewhere in the economy, it’s not all doom and gloom.”
Although there is a slight fall in borrowing rates, existing and first-time buyers may still find that these rates concerning.
Mortgage approvals have in fact fallen to their lowest level in two years, in conjunction with rising interest rates which has put off numerous buyers. Figures from the Bank of England revealed that approvals slumped to just over 46,000 in November, which dropped from 58,000 in October.
On average, mortgage rates have fallen since the September mini-budget, however they are still higher than they were at the beginning of last year.
Simon Bath, property expert and CEO of iPlace Global, said: “Speaking very generally, the fallout from 2022 is still slowly unfolding in the UK property market.”
He added: “In light of the news regarding a sustained decline in house prices into 2023, it will be interesting to see which way the pendulum swings. I think we could potentially see a higher number of first-time buyers entering the market, as they look to get onto the property ladder and take advantage of lower prices amidst a cost-of-living squeeze.”