Good news for homeowners as mortgage misery is predicted to ease in the coming months, according to Halifax, the UK’s biggest mortgage lender.
While mortgage costs remain a top concern for those buying a home or coming off fixed-rate deals, there are signs of hope on the horizon.
Amanda Bryden, head of mortgages at Halifax, believes rising incomes and slowing house price growth will gradually alleviate the pressure caused by high interest rates.
House prices remain steady
The latest Halifax data reveals that UK house prices remained relatively stable in June, dipping a mere 0.2% from May to an average of £288,455.
This follows a similar trend reported by Nationwide building society, with prices showing a 1.6% increase compared to the previous year.
Interest rate uncertainty remains
Despite this positive news, Ms Bryden warns that the market remains delicately balanced. Future changes to the Bank of England’s base rate will have a significant impact on the mortgage landscape.
The Bank of England has been steadily raising interest rates since late 2021 to combat soaring inflation, which was fuelled by pandemic-related disruptions, the war in Ukraine, and surging food and energy costs.
The base rate currently sits at 5.25%, a 16-year high. However, recent hints suggest a possible rate cut at the next meeting on August 1st.
Fixed-rate mortgage woes
The impact of rising interest rates has hit homeowners coming off fixed-rate deals particularly hard, with many facing significantly higher monthly payments.
Recent figures from the Bank of England show that approximately three million households are braced for increased mortgage payments over the next two years.
The average two-year fixed-rate mortgage currently stands at 5.93%, down from last year’s peak of 6.86%. Encouragingly, major lenders have been reducing rates in recent days.
Regional variations
Halifax data highlights regional variations in house price growth. Northern Ireland leads the pack with a 4% surge compared to the previous year, while London maintains its position as the most expensive region, with average prices reaching £536,306.
Market outlook
Experts like Sarah Coles, head of personal finance at Hargreaves Lansdown, describe the housing market as “tepid” for most of the year. She attributes this to the combined effect of elevated mortgage rates, soaring house prices, and persistent supply-demand imbalances.
The upcoming government’s housing policies are expected to play a pivotal role in shaping the market’s future. Labour’s election campaign promise to build 1.5 million homes over the next parliament, with a focus on planning reforms and green belt development, is likely to be high on the agenda.
However, Ms Coles cautions that overhauling the planning system is a complex and potentially lengthy process.
Halifax predicts modest property value increases throughout this year and into 2025. Other mortgage brokers suggest that the conclusion of the election campaign could provide a much-needed boost to the market.