香蕉福利直播

By Paul Broadhead, Head of Mortgage & Housing Policy at the 香蕉福利直播. 

Whilst the latest inflation figures finally dropped into single digits (CPI was 8.7% in the 12 months to April 2023, down from 10.1% in March) it still remains stubbornly higher than expected. As a result, markets are now pricing in higher rates than previously anticipated, currently around a peak of 5.5%, which naturally leads to higher mortgage rates as lenders adjust their propositions to reflect the changing market conditions.

Unsurprisingly there are signs that the housing market is cooling. The out last week (1 June) showed average house prices fell 3.4% in the year to May, the biggest annual drop since the 6.2% fall in 2009, and 4% below their peak in August 2022. On the same day, the Bank of England reported net lending at a record low outside the pandemic, with £1.4bn more repaid on mortgages than taken out on new mortgages.

Andrew Bailey, Governor of the Bank of England, recently said that some of the strength in the inflation reflects the effect of higher energy prices. However, he highlighted that despite 12 consecutive Bank Rate rises there is now a wage-price spiral and these ‘second round effects’ are unlikely to go away as quickly as previously thought. He confirmed that the Bank will continue to adjust the Bank Rate ‘as necessary’ to reach the 2% inflation target.

So, whilst we’re likely to see further rate rises, unlike in Autumn last year, the turbulence we are experiencing should be short-lived. But what does that mean for individuals either trying to get onto the property ladder, or those who are struggling to meet their rising mortgage costs?

First-time buyers

For first-time buyers the impact of higher mortgage costs compared to a year ago, alongside the rising cost of living, will affect the home they can buy. They may need to lower their ambitions as they are unlikely to be able to borrow at the level they might have achieved before the Bank Rate started to rise, even though house prices have dipped.

There are however a number of initiatives available to help them take their first step to homeownership. Front of mind is Skipton Building Society’s Track Record Mortgage, offering a no-deposit mortgage for those who can demonstrate that they’ve maintained their rental payments in full for at least 12 months - the first 100% mortgage since the financial crisis. With our quarterly Property Tracker consistently reporting that raising a deposit is one of the biggest barriers to buying a home, this will be welcome news for many aspiring homeowners. Other lenders are also innovating in this area with a variety of offerings, including 5% deposit schemes, shared equity and joint ownership loans, all aimed at enabling individuals to become homeowners sooner than they otherwise would.

The government also provides support, with to boost deposits and  and the . There is also speculation that (HTB), which closed in March this year, may return. But interventions such as these tend to fix symptoms and not causes.  In my view, government schemes can skew the market and stifle innovation in the private sector. We need to resolve the housing supply conundrum rather than focusing largely on the demand side.

Struggling homeowners

Although inflation has passed its peak, the cost of food, energy and other items is still rising month on month and continuing to strain many household budgets. Whilst around 85% of homeowners have a fixed rate mortgage, 1.8 million will come to the end of their term this year. We calculate that on average they’ll see their payments increase by around £175 a month, and of course that will be much higher for those with larger loans.

Arrears levels have so far remained historically low and our research suggest that around nine in ten homeowners are not currently concerned about their ability to make their monthly mortgage payments. Only time will tell if they have factored future increases into their household budgets. The 3% mortgage stress test is likely to have gone some way to ensuring borrowers can weather some increase in mortgage payments, although other cost of living increases may have eaten into this buffer.

However, wider economic indicators are suggesting arrears rates will start to tick up. Mortgage lenders are conscious that each mortgage in arrears is a real worry for the individual or family affected. They have experienced teams, with a wide range of options, ready to offer practical, tailored support.

We welcome the Financial Conduct Authority‘s (FCA) consultation on ‘Borrowers in financial difficulty’ which proposes to permanently embed some of these best practices into the mortgage handbook – MCOB. The consultation also proposes strengthening the support for struggling consumer credit borrowers by building similar requirements into the Consumer Credit Sourcebook (CONC). The consultation ends on 13 July and to my mind, its proposals can only be positive news for consumers.