Five things you should know about the mortgage market

Following the Bank of England's decision to raise the base rate to 1%, we look at five significant trends to watch in the UK mortgage market.

Rising interest rates

The Bank of England is gradually raising borrowing prices to control inflation, which is at its highest level in thirty years. The hike in the base rate to 1% today means that mortgage rates will continue to rise in the coming weeks.

Each week, products are repriced, creating significant uncertainty for borrowers. Rates on the best offers have doubled in the last six months, albeit they are still historically low at 2%.

Bank lending standards are constantly evolving, and we expect mortgage rates to continue to rise in the coming months. If you're having trouble getting the mortgage you want, don't hesitate to contact us and see how we can help.

Remortgaging is gaining popularity

Remortgage activity has increased as borrowers try to get ahead of future interest rate hikes. According to data from UK Finance, the number of refinancing deals, excluding those in which equity was withdrawn, reached 17,720 in February, up from 10,230 the previous month. This equates to about ￡3.6 billion in new contracts.

Rents are increasing

As residents repopulate cities in the aftermath of the epidemic, average private rents are skyrocketing due to a shortage of accessible properties. In April, average asking rentals in London increased by 14% over the previous year. Outside of London, rents increased by more than 10%, with a 14% surge in areas like Manchester.

The final months of the Help to Buy scheme

In the first quarter of 2019, developers sold almost 6,000 new homes in London, the most since the first quarter of 2018.

The government's Help to Buy policy will expire in less than a year, and there is already a rush to purchase qualified properties while they are still available.

The housebuilder-led "Deposit Unlock" programme, which allows borrowers to obtain up to ￡750,000 at 90% to 95% LTV, is gaining traction, with 17 housebuilders now signing up. The plan is supported by two lenders, including Nationwide.

The expanding equity release market

In the last year, the average home in the United Kingdom has gained ￡27,000 in value. An increasing number of senior borrowers are looking for strategies to disperse their money to family members while they are still alive.

Between January and March, quarterly lending to equity release customers increased to ￡1.53 billion, up from ￡1.34 billion in Q4 2021. Wealthier homeowners, who see Equity Release as a key financial planning tool, particularly for the aim of minimising inheritance tax, are driving much of the market's expansion.

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