The days are longer, and the weather is warmer – but are we in a new phase for the mortgage market? The latest figures from Google Search reveal that there has been a 400% rise in searches over whether mortgage rates will go up, showing that this is a huge concern for many people looking to purchase a property.
Some recent statistics
According to the government house price index, house prices in the UK have increased 10.9% on an annual basis, with the average property in the UK being valued at £276,755. House prices in the UK have risen by 0.5% since January this year.
In February 2022 the estimated number of property transactions of residential properties with a value of £40,000 or above was 112,240, which is a 20.8% decrease compared to the previous year. Between January and February 2022, UK transactions increased by 4.4% on a seasonally adjusted basis.
In addition, Knight Frank has estimated annual growth of 5% in 2022, with just a 1% growth the year after. It said higher mortgage rates, the cost-of-living squeeze, and increased supply will slow house prices.
The mortgage market
We have now had the removal of the last of the Covid-19 restrictions, but we are seeing the rise in cost of living, interest rate rises and rising inflation. These changes are causing concern among borrowers, but it’s worth noting that we are reverting to pre-pandemic rates, and this is very much an expected and much needed correction. However, borrowers are worried about what this all means for the future of the mortgage market.
If there’s anything that previous crises have shown us, it’s that the mortgage market is resilient and able to adapt to change. When the stamp duty holiday ended, many existing and aspiring homeowners believed that the mortgage market would slow down and prices would fall, but demand just kept on rising. We saw an imbalance between supply and demand with not enough properties to satisfy the number of buyers wanting to buy their first home or move up the property ladder. Following the pandemic we saw a huge shift in buyer priorities with a move away from city centres to homes with more space inside and out, and more rooms to allow for home or hyprid working.
The start of this year has continued the trend of high demand and rising prices despite the interest rate rises – with demand 6% up on the same period last year. In addition, the buy-to-let market has remained strong, and we have seen a shift towards product transfer and remortgaging.
But will the high demand continue into this year? One challenge is the rise in our cost-of-living. Economists from Experian have estimated that the NI rise, energy and fuel price rises, interest rate rises, and the removal of the Universal Credit uplift could add as much as £4,500 a year to the expenses of the average UK household. However, the mortgage market has remained resilient because those with mortgages, including fixed-rate options, are more likely to react when they feel the true impact of rising costs. In addition, those with mortgages are possibly impacted proportionally less than those on lower incomes. In addition, estate agents are continuing to report that demand for new homes is still there.
The latest research from Mortgage Strategy shows that borrowers are taking a more proactive approach to their mortgage needs with Google search data revealing a 3,500% increase in those searching for mortgage broker in their area and are also researching the mortgage market in advance of speaking to an advisor.
If you are considering buying a new home or coming to the end of your current fixed rate deal, talk to us at The Mortgage Hub to find out more about your options and to get advice on the property market in your area.