Budding optimism as housing market starts to stabilise

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The volatility which characterised 2022 is starting to recede

With Spring finally starting to unfold, other shoots of optimism are visible amid a more stable property market.

Newly released Bank of England (BoE) data revealed that UK mortgage approvals hit a five-month high in March, suggesting that the property market is starting to recover from the chaos sparked by former prime minister Liz Truss’s ‘mini’ budget in September. Data from Nationwide also found that house prices unexpectedly rose 0.5% from March to April, ending seven consecutive months of decline. A lack of supply means prices are likely to continue to hold firm for the foreseeable future.

After nine rises in 2022, interest rates are predicted to continue to hover around the 4% range in 2023. We believe the Monetary Policy Committee’s decision to increase the base rate by 25bps to 4.5% earlier this month could well be the last hike this year if inflation falls as predicted. Food prices – a major driver of inflation – are believed to have peaked, according to a wealth of data including from the retail sector while wholesale energy prices, another driver, are also declining. Signs suggest the period of interest rate rises might also be at an end in the US. The IMF, meanwhile, has upgraded its forecast for the UK, which it now expects to avoid a recession this year. This chimes with the Office for Budget Responsibility which also believes that the near-term economic downturn in the UK will be shorter and shallower than previously expected.

In short, the general economic picture is a lot healthier than it was even just months ago. And the result of all these shoots of recovery is a cautious optimism around buying, which is filtering through in real-time. We saw a 16% increase in enquires month-on-month in April, of which 51% were for residential purchases, and 31% were for remortgages.

What does this mean for my mortgage?

Despite a broadly rosier outlook, lending markets remain tight, and planning ahead and getting advice to successfully navigate waters which always have the potential to become choppier unexpectedly is more crucial than ever.

With lender multiples remaining strong, many in the region of 5-5.5 times income, and 100% mortgages making a comeback, there are a vast array of mortgage options on offer. This includes those suitable for first-time buyers, who are finding buying increasingly compelling in the face of record rents as landlords continue to sell up and the number of available rental properties dwindles.

The race to remortgage is also on – according to the Office for National Statistics, more than 1.4 million households will renew their fixed-rate mortgages this year, with the majority (57%) of those coming up for renewal fixed at rates below 2%[8].

However, not all offerings are equal, and we are seeing a flight to quality, combined with some flexibility in the market. This is where our expertise is able to shine when it comes to securing the best deal for each client’s individual circumstances.

Word on the street…

We are finding that lenders are prepared to adjust basic criteria for the right clients, but affordability models remain constrained compared to a year ago. Hunting out the best deals for each client continues to be at the core of our service offering.

While traditional lenders remain active and looking to lend, smaller lenders, such as building societies, can offer clients tremendous variety, flexibility and value for money. As well as getting the right advice, preparation remains key. While the days of seven or eight buyers competing for every house are receding, many of the best properties are still selling for well over the asking price, and quickly, so getting your options ready in advance certainly offers significant ‘first mover advantage’.

Trend data – what we’re seeing

More customers than ever are choosing to make overpayments, making use of their savings to reduce their monthly payments.

In addition, wealthy offshore clients are both returning and looking to release equity tied up in property, which points to a perception of opportunity in the near future.

As always, the Henry Dannell team is here to provide expert advice and guidance which will enable you to make informed decisions. Get in touch with us to find out more about our offering and how we can help you achieve your mortgage goals.

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Please note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.