Mortgage market still in low interest rate territory
There is an argument for caution in an environment with rising inflation coupled with increasing interest rates. Inflation has reached its highest level in a 40-year period and interest rates have continued to creep up this year, with the latest rise putting the base rate at 1.25%.
However, there is another way to look at the present market environment.
“We are still in very low interest rate territory and as such there is plenty of appetite to buy and sell,” according to John Phillips (pictured), national operations director at Just Mortgages.
Phillips explained that the market has not yet reached anywhere near the rate at which he believes people should start hunkering down and wait to see what happens.
“You only have to look at the variety of products and how competitively priced they are to know there is plenty of appetite for lenders to lend. This appetite will keep pace with the demand we are currently seeing, and may entice others,” he added.
Demand has continued to outpace supply in the housing market despite the challenges facing buyers with the rising cost-of-living and house price growth.
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“Borrowers are still managing to raise deposits, helped in no small measure by the ‘bank of mum and dad’ and, as such, the first-time buyer market remains buoyant,” explained Phillips.
He noted he has also seen an increase in the number of people looking for shared-ownership mortgages, which he believes will continue into next year.
“This will likely be the solution for many when help-to-buy comes to an end in 2023,” he added.
With the cost-of-living crisis now impacting buyer affordability, it is believed affordable housing schemes will play an important role in helping many people on to the property ladder.
“As a country, we have always struggled with supply and demand, but people will always want to buy and there will always be someone, somewhere, looking to sell,” said Phillips.
Karl Wilkinson, chief executive of Access Financial Services, explained that judging by the activity in the market at the moment, people are not waiting for better conditions.
“People are still buying and selling, I do not see any evidence that people are waiting,” Wilkinson said.
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“We are as busy as ever and confidence is still high. There are new products coming along all the time, and new lenders innovating.”
He explained that the market is constantly adjusting and adapting to the economic circumstances, which he said has keep activity alive.
Wilkinson said that, for the time being at least, people are finding ways to buy and sell, despite the fact that house prices have continued to rise due to lack of supply.
However, he did explain that the only part of the market which has seen a change in activity is that of larger properties, which he said have recently started to take a little more time to sell.
“However, two- and three-bedroom homes are still flying. We have even seen properties in the same street sell for over 20% more than an identical neighbour just a few weeks later,” he added.
Nonetheless, with one eye on the future, and the Bank of England’s remit to bring inflation down, Wilkinson said that he is anticipating interest rates will continue to rise over the remainder of the year. This, he believes, means there will be a threshold people reach when the waiting game will begin.
“Whether it is waiting for interest rates to come down, or house prices, or even for fuel prices, who knows? Affordability will be the driving force, but, for now, people are doing anything other than waiting,” Wilkinson concluded.
