Banks cut mortgage rates

HSBC is the latest lender to reduce mortgage rates, following hints of a summer base rate cut by the Bank of England. NatWest cut the costs of its fixed-rate home loans for new deals, followed by Barclays.??

However, these reductions are small in the wider context. Borrowers still face relatively high costs, with many facing significantly higher monthly repayments when their current, cheaper deals expire. Average mortgage rates have been creeping up, driven by a lack of fresh competition between lenders during the election campaign.??

The average rate on a two-year fixed deal stands at 5.96% according to the financial information service, Moneyfacts. It said the average five-year deal had a rate of 5.53%. David Hollingworth, from broker L&C said, “These moves by HSBC and others suggest that the recent edging up in rates is now underwinding and most cuts are being made in small steps.”?

The interest rate on a fixed mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it. Doing nothing would leave people on a variable rate, which can be very expensive. About 1.6 million homeowners have relatively cheap fixed-rate deals expiring this year.?

The election looms??

The 4th of July is on the minds of most as the election edges ever closer, Labour and the Conservatives have accused each other of failing to match promises on housing.??

The Conservatives said they were offering a better deal on stamp duty, by permanently abolishing the levy for first-time buyers purchasing properties up to ￡425,000. Meanwhile, Labour said its more ambitious plans for energy efficiency in rental homes would protect tenants from higher energy bills.???

The threshold at which first-time buyers start paying stamp duty was temporarily raised from ￡300,000 to ￡425,000 until April 2025. The Conservatives have pledged to keep it at that level permanently and claim that by not matching their plan, first-time buyers under Labour would face a tax bill of up to ￡11,250.?

Housing Secretary Michael Gove, who is not standing for re-election, said the Conservatives had a "clear plan" to help people get on to the property ladder, and accused Labour of "hammering hundreds of thousands of first-time buyers with a massive stamp duty increase from next April". Labour have said they would keep the current stamp duty exemption for first-time buyers, but speaking on earlier this month, leader Sir Keir Starmer would not commit to extending it as proposed by the Conservative manifesto.?

Analysts point out that stamp duty is primarily paid by those buying larger homes, or in more expensive areas. Potential savings would not benefit everyone, as some would not need to pay it anyway.?

According to the Office for National Statistics, the average house price for first-time buyers in Britain in April 2024 was ￡236,000, which would not be subject to any stamp duty.?

UK house prices remain near record high with little sign of election impact?

A recent survey conducted by Rightmove found 95% of those planning to move said the election would not change their plans.??

The average asking price for a UK home remained near its record high in June, at ￡375,110, as the housing market maintains its “2024 momentum” across most of the country, latest figures show.???

Rightmove say price trends differed across the country, with the strongest price growth seen in the less expensive, more northerly regions. By contrast, the higher-priced east of the country and London regions recorded this month’s only price falls.?

The only area in which it had detected some possible caution among would-be sellers was at the top end of the market. In the two weeks following the election announcement, the number of top-end sellers coming to market was 3% lower than a year ago, while in the previous two-week period it had been 11% higher than in 2023.?

Owners of the most upmarket properties appeared to be pausing their plans to see how the next few weeks unfold, Rightmove said.?

“It’s always difficult to predict how home-movers will react to sudden uncertainty, but the market activity has remained largely steady this time,” said Rightmove’s director, Tim Bannister.?

“Our survey of more than 14,000 people also supports the data, with the vast majority of respondents carrying on with their home moving plans” he said. “However, some potential sellers appear to be watching and waiting rather than taking action, evidenced by a dip in the number of new sellers coming to market, particularly at the top end. Overall, it appears to be business as usual for the mass market.”??

Pent-up demand is a key driver behind increased buyer and seller activity, despite mortgage rates remaining elevated for longer than anticipated.?

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