Following the latest MPC (Monetary Policy Committee) meeting, the Bank of England base rate now sits at 4% after a further increase of 0.5%. Conversely, mortgage rates continue to reduce; in the last 4 months, fixed rates have fallen by over 2%, and this pattern is expected to continue.
The Economy: Signs of a Stabilising Market
2022 brought significant challenges that impacted the cost of borrowing, including the war in Ukraine and rising energy prices, which sparked sharp spikes in inflation. The current inflation rate stands at 10.5%, significantly above the BoE’s target of 2%. However, the predicted deep recession in the UK economy has been revised to a ‘shorter, shallower’ decline, and stability is slowly returning to the market.
Global equity markets are making a strong start to the year, and interest rates seem to be reaching peak levels. In the US, it is expected that interest rates will start to decrease by Q4 2023, and in the UK, the BoE suggests inflation could be as low as 5% by the end of the year, allowing for the consideration of rate cuts to take place to promote the stimulation of growth in the economy.
Interest Rates: What to Expect
The rate market is currently experiencing contrarian behaviour. Following the latest MPC (Monetary Policy Committee) meeting, the Bank of England pushed the base rate up by a further 0.5%, taking it to 4%. Conversely, mortgage rates continue to reduce, with margins on tracker rates being ‘cut to the bone’ (as low as 0.14% over base), and fixed rates being reduced on a weekly basis. This trend is expected to continue as SWAP rates are broadly at pre-mini-budget levels. In the last 4 months, fixed rates have fallen by over 2%, and this pattern is expected to continue, leading to fixed rates being priced lower than floating (tracker mortgage) rates.
Despite being significantly higher than in recent times, mortgage rates remain low, and the market has quickly adjusted to the ‘new normal.’ The key is to seek expert advice and make informed decisions based on individual criteria. The Henry Dannell team is here to provide tailored advice and help our clients find the best mortgage solution for them.
Property Prices: What to Expect
Despite a challenging year for the property market, Zoopla reports a 6.5% increase in prices across the year. Despite it being widely expected that property prices would decrease following a testing year for the market; this has not materialised. We have not seen a noticeable increase in lender down valuations over the past 4 months, and we remain optimistic about the UK property market and the economy.
As always, the Henry Dannell team is here to provide expert advice and guidance to help you make informed decisions. Get in touch with us to learn more about our offerings and how we can help you achieve your mortgage goals.
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