Weekly Roundup: Inflation Falls, General Election Announced — Does Market Uncertainty Loom?

A week is a long time in politics, we've gone from not expecting the General Election until the Autumn at the earliest to being in full swing with 6 weeks of electioneering ahead of us. But does this mean for interest rates, especially after yesterday's higher-than-expected inflation numbers and how have lenders reacted so far?

UK Inflation Drop: What It Means for Borrowers

Yesterday's news highlighted a significant milestone: UK inflation has decreased to 2.3% this month, down from 3.2% in April. This marks the lowest inflation rate since July 2021 and reflects a notable slowdown in the pace of price increases. The main driver behind this drop has been a substantial reduction in energy bills, following the revision of the energy price cap in April.

UK Inflation Drop: What It Means for Borrowers

Yesterday's news highlighted a significant milestone: UK inflation has decreased to 2.3% this month, down from 3.2% in April. This marks the lowest inflation rate since July 2021 and reflects a notable slowdown in the pace of price increases. The main driver behind this drop has been a substantial reduction in energy bills, following the revision of the energy price cap in April.

Economists had predicted a fall to around 2.1%, so the actual figure of 2.3% was a bit higher than expected. Despite this decline, inflation remains above the Bank of England's target of 2%. However, there is optimism that the target will be met in the coming months. This moderation in inflation is good news for the economy overall, but it comes with mixed implications for borrowers.

The Bank of England has decided to keep interest rates steady this May, aiming to maintain control over inflation. Many borrowers had hoped for a base rate cut in June, but given that inflation figures were slightly above expectations and some underlying areas of inflation remain elevated, a rate cut in June now seems unlikely.

Experts suggest that if inflation continues to stabilize or improve, we might see a rate cut in August at the earliest. However, any reduction is expected to be modest as the Bank of England adopts a cautious approach. For borrowers, this means keeping an eye on inflation trends and being prepared for potential rate adjustments later in the year.

Our weekly look at swap rates shows a small jump up - we'll see how markets react to inflation and the general election announcement in the coming days.

Ready, Set, Vote! 6 Weeks of Uncertainty - What Now for Interest Rates?

Following the announcement of a General Election to be held on the 4th of July by Rishi Sunak, you would be forgiven if you thought everything would just be put on hold and lenders would wait for the outcome before making any major changes to their products.

However, first thing on Thursday TSB announced they would be reducing rates by up to 0.4% on certain 2 and 5 Year Fixed First Time Buyer and Home Mover mortgages across their 75-95% LTV range. This is a major move with the potential to save someone who borrows ￡250,000 over 30 years around ￡60 per month.

However, conversely, Barclays announced an increase of around 0.25% across a range of products. This is a surprising move given that many other lenders have been adjusting their rates downwards over the week, however with Barclays being close to the top of the deals in recent weeks this may also be a way of reducing demand while the catch up on backlogs.

First-Time Buyers: Navigating New Realities in Homeownership

Being deeply invested in helping first-time buyers achieve their homeownership dreams, We have been closely following recent research that sheds light on the current challenges and regional disparities in the market.

A recent poll by Nationwide revealed that the cost-of-living crisis is significantly affecting prospective homeowners. An astounding 84% of respondents mentioned its impact on their ability to purchase a property. Alarmingly, 20% of first-time buyers now expect to wait until their forties to buy a home, which is a substantial delay from the average age of 33. The main obstacles remain saving for a deposit and mortgage affordability, with nearly a third of potential buyers citing the deposit as their biggest challenge.

The cost-of-living crisis has caused 49% of potential buyers to delay their plans due to affordability concerns, with 60% postponing their homeownership goals by up to three years. In response, Nationwide is advocating for government support, including an independent review of the first-time buyer market, stamp duty reform, and increased loan-to-income lending.

From our experience, we've seen how these challenges vary across different regions. Research from Coventry for Intermediaries highlights that securing mortgages and funding deposits is particularly tough in the North East, where a higher percentage of buyers struggle compared to the South West, despite higher property prices there. This discrepancy is partly due to a lack of awareness about available support schemes in the North.

Additionally, regional spending patterns add another layer of complexity. Card spending has increased more in the North East than in London and the South East, reflecting different economic pressures. As potential homeowners, it’s crucial to consider these regional spending trends when planning for repayments.

There are, however, some positive developments. In certain regions, the value of residential development land has dropped, potentially making it easier for first-time buyers to enter the market. The key takeaway from these findings is the importance of seeking tailored financial advice that takes into account regional economic diversity. By gaining insights into different areas and working with knowledgeable professionals, you can find more effective ways to navigate the path to homeownership.

In conclusion, as we navigate these evolving dynamics of homeownership, it’s crucial to understand and address both the national and regional challenges. By doing so, you can better position yourself to achieve your goal of owning a home.

Perenna Launches new "Zero Bills" Mortgage with Octopus Energy

Perenna has partnered with Octopus Energy to introduce the Perenna Zero Bills mortgage.

Octopus has created a first-of-its-kind energy tariff providing zero bills for at least five years, guaranteed. This is available on brand new, specially built Zero Bills? homes (limits and exclusions apply).

If you buy a Zero Bills? home, Perenna knows they won't have energy costs, so they will now factor that into their affordability assessment. This means you could potentially borrow more with Perenna, as well as receive all the usual benefits of a Perenna mortgage.

With our Zero Bills mortgage, Perenna also offers a rate discount to reward borrowers for buying a sustainable home and supporting the green energy revolution.

Gen H Increases Affordability on 5-Year Fixed Products

Gen H announced this week that they will now differentiate between 2- and 3-year products and 5-year products in their stress testing, which could positively impact 5-year affordability allowing you to potentially borrow more.

For example:

Jane and John were ready to buy their first home. Jane earns ￡20,000 and John earns ￡40,000, and both have moderate commitments of around ￡300 per month. They needed ￡289,000 to purchase a home in their ideal area. Under the previous stress test, this loan amount was unaffordable.?

Under the new 5-year stress rate, their affordability jumped to ￡303,000 – and they were able to afford a home they loved.?

As usual, all applications are subject to a full affordability and criteria assessment.

Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage. Not all Buy to Let Mortgages are regulated by The Financial Conduct Authority. As with all insurance policies, conditions and exclusions will apply.