Mortgage News – 13th December 2024
Good morning,
Last week we saw lenders reducing fixed mortgage rates, including Barclays, TSB, Santander, and Halifax, offering relief to borrowers. Meanwhile, housing affordability challenges persist, as ONS data highlights deepening disparities, and house prices reached record highs with a 4.8% annual increase in November. On the economic front, the UK economy contracted for a second consecutive month in October, fuelling speculation of a potential base rate cut as inflation expectations ease but cost-of-living pressures remain.
Mortgage Rate Changes
- Barclays reduces selected fixed rates by up to 0.14% for purchases and remortgages.
- TSB reduces some fixed mortgage rates by up to 0.4% for existing and new customers.
- Santander reduces selected residential and buy to let rates by up to 0.23%
- Accord Mortgages reduces rates for residential and buy to let new customers by up to 0.10%.
- Halifax reduces rates by up to 0.17% on 2- and 5-year fixed high LTV home mover and first-time buyer products.
- NatWest reduces rates across their purchase and remortgage ranges by up to 0.05%
- Halifax will incorporate EPC ratings into affordability calculations from 10 December, offering higher loan amounts for energy-efficient properties (A/B ratings) and slightly lower amounts for less efficient ones (F/G ratings), aiming to reflect energy costs and promote green living initiatives.
Average House Price Rises To Hit Record High
The Halifax House Price Index November 2024 has been published this morning. It shows house prices increased by +1.3% in November, a fifth consecutive monthly increase and that property prices are up +4.8% on an annual basis (vs +4.0% last month).
ONS Report: Housing Affordability Crisis Deepens in 2023
The ONS report (Housing Purchase Affordability, UK: 2023) reveals worsening housing affordability in 2023, with average house prices in England at £298,000—equivalent to 8.6 years of disposable household income. Low-income households remain priced out across the UK, with even high earners in London struggling to afford average homes. Experts highlight the urgent need for systemic reform, including increasing housing supply, modernizing affordability calculations, and addressing the growing wealth inequality driven by surging house prices.
Government Announces Overhaul of Planning Committees to Boost Housing Development
The Government has announced a major overhaul of local planning committees to accelerate housing developments and tackle the housing crisis. Proposals include bypassing planning committees for applications that align with local development plans, introducing a national delegation scheme, and streamlining committees for strategic projects. These measures aim to reduce delays, provide greater certainty to housebuilders, and empower planning officers to implement agreed policies efficiently. Major overhaul of planning committees to get Britain building
UK Economy Shrinks by 0.1% in October
The UK economy contracted by 0.1% in October 2024, following a similar decline in September and modest growth in August. Services output remained stagnant for two consecutive months, while production and construction sectors saw declines of 0.6% and 0.4% respectively in October. Analysts warn that the full impact of the Autumn Budget’s ripple effects has yet to materialise, potentially adding further strain to economic performance. GDP monthly estimate, UK: October 2024
Base Rate Cut of 0.25% Could be Likely After GDP Contraction
Following consecutive monthly GDP contractions of 0.1% in September and October, experts suggest a cautious 0.25% base rate cut may occur next week, with further reductions expected in 2025. Persistent cost-of-living pressures and public perceptions of high inflation underscore the challenges faced by households, despite cooling inflation figures. Analysts warn that lingering fears of prolonged high interest rates, compounded by recent Budget measures, highlight the delicate balance policymakers must strike to support economic recovery.
Cost of Living Crisis Persists Despite Falling Inflation Expectations
The Bank of England’s latest Inflation Attitudes Survey (Bank of England/Ipsos Inflation Attitudes Survey – November 2024) reveals the median perceived inflation rate fell to 4.8% in November, down from 5.2% in August, reflecting slightly improved public sentiment. However, 33% of respondents expect interest rates to rise over the next year, up from 29% previously, highlighting continued anxiety about borrowing costs. These findings underscore the persistent financial pressures many households face, despite signs of easing inflation.
Swap Rates
Swap rates showed minor movements over the past week. The 2-year swap rate edged down to 4.080%, a slight decrease of 0.009% from last week’s 4.089%, remaining 0.186% lower than last month and 0.314% below the same period last year. Meanwhile, the 5-year swap rate rose marginally to 3.823%, up 0.009% from last week’s 3.814%, though it remains 0.240% below last month and 0.041% higher year-over-year.
| Swap Rate | 12-Dec-24 | 13-Nov-24 | 13-Dec-23 |
|---|---|---|---|
| 2 Year | 4.080% | 4.266% | 4.394% |
| 5 Year | 3.823% | 4.063% | 3.782% |
Mortgage News – 9th December 2024
The UK property and finance markets in November showed mixed trends, with mortgage rate cuts by Gen H, HSBC, NatWest, Coventry, and Halifax signalling increased affordability, while Halifax and Leeds Building Society introduced innovative measures like EPC-linked affordability and higher-income multiples to support buyers. House price growth continued, with Halifax and Nationwide reporting annual increases of 4.8% and 3.7% respectively, while Zoopla revealed record-breaking property sales in 2024, driven by faster sales times and first-time buyer activity. Meanwhile, bridging finance surged, swap rates dipped slightly, and Bitcoin smashed the $100k milestone, reflecting a dynamic financial landscape as 2024 draws to a close.
Mortgage Rate Changes
- Gen H reduces rates by up to 0.25%
- HSBC cuts rates on selected products while TSB increases rates by 0.10%
- NatWest cuts mortgage rates by up to 0.39% across selected purchase, remortgage, and buy-to-let 2- and 5-year fixed products.
- Coventry cuts fixed rates by up to 0.26%.
- Halifax to incorporate EPC ratings into affordability calculations, offering higher loan amounts for energy-efficient homes (A/B ratings) and lower amounts for less efficient properties (F/G ratings), aiming to better reflect energy costs and support green living initiatives.
- Leeds Building Society launches Income Plus mortgages, enabling first-time buyers to borrow up to 5.5 times their income and access higher loans of up to £356,000 with options available up to 95% LTV for new build houses.
Nationwide: House Price Index
Annual house price growth rebounds in November: UK house prices rose by 1.2% in November, with annual growth rebounding to 3.7%—the fastest rate since November 2022—and prices are now just 1% below their all-time peak. Looking ahead, upcoming stamp duty changes may temporarily distort demand in early 2025, but a gradual recovery in affordability and market activity is expected if the economy continues to improve.
Halifax: House Prices Rise for Fifth Consecutive Month
House prices increased by 1.3% in November, marking the fifth consecutive monthly rise, with annual growth accelerating to 4.8%—the highest since November 2022. The average UK property price reached a new record of £298,083, with Northern Ireland leading annual growth at 6.8%. Regional highlights include strong gains in the North West (+5.9%) and West Midlands (+5.5%), while Scotland saw more modest growth at 2.8%. November 2024 Halifax House Price Index
Zoopla Reports 1.1 Million UK Property Sales in 2024
Zoopla revealed a 10% increase in property sales in 2024, reaching 1.1 million completions, with three-bed semi-detached homes as the most popular choice. Properties sold faster, with the average time to sell dropping to 33 days. Zoopla forecasts 1.5 million sales in 2025, supported by lower interest rates and first-time buyers driving housing chain activity.
Q3 2024 Household Finance Trends Show Resilience Amid Challenges
In Q3 2024 Household Finance review from UK Finance, confirmed household confidence dipped amidst economic uncertainty, but spending and mortgage lending showed signs of recovery, supported by easing cost pressures and wage growth. Mortgage arrears began to decline after modest increases earlier in the year, driven by strong lender forbearance, low unemployment, and stringent affordability rules. Although possessions rose slightly, they remained low by historical standards, primarily affecting older mortgages, while the broader market benefited from tighter lending criteria and gradual improvements in affordability.
November Mortgage Searches Decline but 2024 Sets Records
Purchase mortgage searches fell by 11.1% in November, alongside declines in remortgage (-8.6%) and buy-to-let purchase searches (-14.6%), according to Twenty7tec. Despite these monthly drops, October and November 2024 marked the busiest-ever period for purchase mortgage searches, up 17.1% compared to 2023. The data also highlighted a shift toward shorter fixed-term mortgages, reflecting changing consumer expectations about interest rate trends.
A Rise in Bridging Finance
Bridging finance activity increased in November, driven by homeowners downsizing to prepare for potential spring rate cuts and professional investors capitalizing on opportunities created by amateur landlords exiting the market after the Autumn Budget. Investors are using bridging loans to secure below-market-value properties and convert buy-to-let units into higher-yield HMOs or undertake commercial-to-residential conversions. Lower bridging rates, flexibility, and speed are attracting borrowers aiming to add value or complete deals before SDLT deadlines and the traditional Christmas slowdown.
Bitcoin Smashes $100k Milestone
Bitcoin has surged past the $100,000 mark, driven by factors like Federal Reserve rate cuts, strong ETF flows, and pro-crypto sentiment following the US presidential election. Experts highlight the milestone as significant, signalling growing institutional interest and Bitcoin’s acceptance as a mainstream asset, though volatility and regulatory uncertainty remain concerns. Investors are urged to approach cautiously, as the potential for further growth comes with substantial risks inherent to the speculative nature of cryptocurrencies.
Swap Rates
Swap rates experienced slight declines over the past week. The 2-year swap rate dropped to 4.089%, a decrease of 0.017% from last week’s 4.106%, though it remains 0.164% lower than last month and 0.464% lower than the same period last year. Similarly, the 5-year swap rate fell to 3.814%, down by 0.015% from last week’s 3.829%, marking a decline of 0.273% compared to last month and 0.132% year-over-year.
| Swap Rate | 05-Dec-24 | 06-Nov-24 | 06-Dec-23 |
|---|---|---|---|
| 2 Year | 4.089% | 4.253% | 4.553% |
| 5 Year | 3.814% | 4.087% | 3.946% |
Mortgage News – 2nd December 2024
The mortgage market has seen notable developments this week, with adjustments in rates, rising approvals, and challenges on the horizon for borrowers. Barclays, Santander, and TSB made rate changes, while Halifax launched a new one and a half year remortgage product. Meanwhile, mortgage approvals hit their highest level since 2022, but millions of borrowers face significant payment increases as refinancing accelerates, highlighting the need for proactive advice and lender flexibility.
Mortgage Rate Changes
- Barclays reduced rates on their residential fixed-rate mortgages of up to 0.2%.
- Santander raised selected residential and BTL fixed rates by up to 0.18%.
- TSB adjusted fixed rates across Residential, BTL, Product Transfer, and Additional Borrowing ranges, with increases of up to 0.3%.
- Halifax launched a 1.5-year fixed-rate remortgage product with £250 cashback.
Mortgage Approvals Hit Highest Level Since 2022
Bank of England’s Money and Credit – October 2024 report shows mortgage approvals for house purchases rose to 68,300 in October, the highest since August 2022, while remortgage approvals increased slightly to 31,400. Net borrowing of mortgage debt grew by £0.9 billion, reaching £3.4 billion for the month. These figures indicate a rebound in mortgage activity.
Millions Face Mortgage Payment Increases Amid Refinancing Surge
The Bank of England’s Financial Stability Report highlights that between December 2024 and late 2027, 4.4 million borrowers will refinance onto higher mortgage rates, with 31% facing rates above 3% for the first time and some seeing monthly payments rise by over £500. While 27% of borrowers are expected to benefit from decreasing payments due to falling rates, experts warn that many households may struggle with financial pressures, especially if unemployment rises or wages stagnate. Borrowers should seek advice early and lenders need to provide flexible solutions to mitigate the risk of arrears and wider economic consequences.
Annual Housing Supply in England Falls by 6%
New data from the ONS Housing supply: net additional dwellings, England: 2023 to 2024 shows annual housing supply in England reached 221,070 net additional dwellings in 2023-24, a 6% drop from the previous year. This includes 198,610 new builds, 21,590 conversions from non-domestic to residential use, and 4,360 house-to-flat conversions, offset by 5,390 demolitions. Of these, 9,592 net additions came via permitted development rights, with the majority from former offices and other non-domestic buildings.
Zoopla Predicts House Price and Sales Growth for 2025
Zoopla’s November 2024 House Price Index forecasts UK house prices and sales volumes to grow in 2025, with sales expected to rise by 5% to 1.15 million. While average house prices increased by 1.5% in 2024, regional disparities persist, with stronger growth in Northern Ireland and the North West, but weaker performance in Southern England due to affordability pressures. Lower mortgage rates, rising incomes, and changes to stamp duty have improved buyer confidence, fuelling demand and setting the stage for a competitive property market in 2025.
Later Life Mortgage Lending Rises 9.7%
UK Finance’s Q3 Later Life 2024 data shows 33,840 new later life mortgage loans were advanced, totalling £5.2bn—a 9.7% year-on-year increase in value. However, lifetime mortgages saw a decline, with 5,830 new loans totalling £510mn, down 18.8% in volume and 8.9% in value compared to last year. Residential later life loans accounted for 7.7% of all residential loans, while BTL later life loans made up 21.7% of all BTL loans.
Swap Rates
Swap rates have seen modest shifts over the past week. The 2-year swap rate decreased to 4.106%, down by 0.074% from last week’s 4.180%, though it remains 0.080% higher than last month and 0.514% lower than this time last year. Similarly, the 5-year swap rate dropped to 3.829%, a decline of 0.125% from last week’s 3.954%, yet it is 0.044% below last month’s level and 0.206% lower year-over-year.
| Swap Rate | 28-Nov-24 | 29-Oct-24 | 29-Nov-23 |
|---|---|---|---|
| 2 Year | 4.106% | 4.026% | 4.620% |
| 5 Year | 3.829% | 3.873% | 4.035% |
Mortgage News – 25th November 2024
Last week mortgage rates stabilised with little changes and a reduction in the swap rates. However, broader economic factors, including rising inflation, the energy price cap increase, and concerns over public borrowing, underscore the complex and uncertain environment for households, businesses, and investors alike.
Mortgage Rate Changes
- NatWest’s increased fixed rates across new business and existing customer ranges for purchase and remortgage products.
- Virgin Money launches new fixed-rate mortgage products, including 80% LTV options starting at 4.34%, while increasing rates on select 2- and 5-year products by up to 0.15%.
- Gen H has reduced rates for the third consecutive week, cutting 2- and 3-year products at 90% and 95% LTV by 0.10% and 5-year products by 0.12%.
Budget Fallout: Mortgage Experts Criticise PM’s Denial of Responsibility
Financial professionals strongly oppose the Prime Minister’s claim that the Autumn Budget is not to blame for rising mortgage rates, pointing directly to government decisions as the cause. Inflationary pressures, higher swap rates, and market instability, warning that borrowers face an increasingly challenging environment due to the Budget’s impact.
Record-Breaking Petition Reflects Public Frustration with Labour’s First Months
The rapid success of a petition calling for a General Election highlights widespread dissatisfaction with Labour’s initial months in power. Voters who sought change now face policies perceived as anti-business and fiscally restrictive, fueling calls for accountability. While a snap election is highly unlikely, the petition serves as a stark warning to the government that public patience with economic missteps and unfulfilled promises is running thin.
Rising Inflation Shuts the Door on December Rate Cut
October’s CPI jump to 2.3% as confirmed by ONS: Consumer price inflation, UK: October 2024 could effectively eliminate any chance of a December base rate cut, with inflation exceeding the Bank of England’s target. The increase, driven by higher costs and compounded by the Autumn Budget’s impact, signals a prolonged period of high interest rates, further straining mortgage holders and the property market. This economic setback not only dampens optimism for early 2025 but also highlights the challenges facing both borrowers and the broader UK economy.
Record Debt Relief Orders Highlight Growing Financial Strain
The record-high number of Debt Relief Orders (DROs) reflects a troubling trend of individuals relying on debt to manage basic living costs. Rising interest rates, stagnant wages, and the lingering effects of the cost-of-living crisis have left many households and small businesses financially vulnerable. Without systemic changes to ease these pressures, insolvencies and financial hardship are set to rise, underscoring the urgent need for effective economic solutions. Commentary – Individual Insolvency Statistics October 2024
Borrowing Hits Record Highs
The UK’s public sector borrowing reached £17.4 billion in October 2024 – Public sector finances, UK: October 2024, the second highest October figure since records began, highlighting escalating fiscal challenges. Rising debt, inflation-driven costs, and stagnant growth risk further destabilizing the economy, with experts warning of potential stagflation and declining investor confidence. As borrowing continues to climb, tough decisions on taxation and spending loom, raising questions about the long-term sustainability of the country’s finances.
From Optimism to Uncertainty: UK Property Market Faces Challenges
According to ONS: Private rent and house prices, UK: November 2024.The UK property market has shifted dramatically in recent weeks, with rising rents and house prices. Landlords exiting the market and increasing mortgage rates have left tenants and first-time buyers facing financial pressure. While a tough start to 2025 seems likely, experts hope for eventual stabilization, but confidence in the market remains fragile.
Labour’s Housing Pledge Lacks Accountability
The government’s goal of building 1.5 million homes without annual targets has sparked criticism for lacking accountability and clear planning. Without measurable milestones, the promise becomes unrealistic, and past failures to meet housing targets highlight the need for better execution. The absence of specific benchmarks raises concerns over how the housing crisis will be tackled effectively, leaving many questioning the feasibility of the pledge.
Affordable Housing in England: Mixed Progress with Worrying Declines in New Starts
England delivered 62,289 affordable homes in 2023-24, just 2% down from the previous year and the second-highest figure since 2014-15, with 93% of these being new builds. Affordable housing supply in England: 2023 to 2024 confirms social rent completions reached a decade-high of 9,866 homes, while 65% of all affordable completions were for rent, maintaining trends from previous years. However, new starts dropped by a staggering 39% to 43,439, the lowest on record, with London seeing an alarming 88% plunge, raising concerns about the sustainability of affordable housing supply in the years ahead.
Mortgage Market Outlook for 2025: Challenges and Opportunities
The UK property market in 2025 is expected to be shaped by a mix of recovery and uncertainty. Anticipated interest rate cuts and easing inflation could encourage more transactions, with mortgage lending projected to grow by 3.2% compared to 2024. However, challenges remain, as smaller landlords are likely to continue exiting the market due to tax and regulatory pressures, while first-time buyers may face a race to beat Stamp Duty changes, particularly in the first quarter. The Chancellor’s March budget will be pivotal in determining the trajectory of the market for both homeowners and investors.
Energy Price Cap Rise Adds to Household Financial Strain
Energy price cap will rise by 1.2% from January. The 1.2% increase in the energy price cap from January will add £21 annually to the average household bill, further stretching already tight budgets. For families grappling with high costs, this is another unwelcome blow, compounding pressures from rising mortgage rates, rents, and inflation. Without urgent government action or long-term energy solutions, household finances will remain under strain, with broader implications for economic growth and inflation control.
Stamp Duty Rises Prompt Surge in Buyer Activity Ahead of April Deadline
The impending Stamp Duty hikes in April have triggered a wave of urgency among buyers, particularly first-time buyers and investors, aiming to complete purchases before the deadline. With average transaction times spanning 4-6 months and the holiday season causing delays, buyers are being advised to act swiftly to avoid being caught out by the changes.
Construction Industry Hits Record Value but Faces Future Challenges
In 2023, the value of new construction work in Great Britain reached a record £139 billion, driven by significant private and public sector investments. However, a 16% drop in new orders, particularly in private housing and public infrastructure, raises concerns about a slowdown in future projects. While employment in construction increased slightly and public housing saw growth, the industry faces challenges in balancing sustainability, affordability, and long-term investment needs.
Swap Rates
Swap rates have shown minor adjustments over the past week. The 2-year swap rate decreased slightly to 4.180%, down by 0.038% from 4.218% last week, though it is 0.283% higher than last month and 0.542% lower than this time last year. Similarly, the 5-year swap rate dropped to 3.954%, a decline of 0.055% from last week’s 4.009%, yet it remains 0.250% above last month’s level and 0.202% lower year-over-year.
| Swap Rate | 21-Nov-24 | 22-Oct-24 | 22-Nov-23 |
|---|---|---|---|
| 2 Year | 4.180% | 3.897% | 4.722% |
| 5 Year | 3.954% | 3.704% | 4.156% |
Mortgage News – 18th November 2024
The mortgage market is currently experiencing a wave of rate increases, with lenders like TSB, Virgin Money, NatWest, and Barclays raising rates on various fixed and tracker products. Sub-4% fixed mortgage deals have largely disappeared, reflecting broader economic pressures following the Autumn Budget and shifts in swap rates. Stagnant economic growth was reported as well as a surge in mortgage possession claims, highlighting the challenging landscape for borrowers and property investors.
Mortgage Rate Changes
- TSB raised selected fixed rates by up to 0.3%. then raised again
- Virgin Money increased residential and BTL fixed rates by up to 0.25% across all ranges.
- NatWest increased fixed rates by up to 0.35% on new business rates.
- Barclays increased rates on selected mortgage products for example rising from 3.96% to 4.30% for the Premier 2-year fixed rate at 60% LTV.
Sub-4% Fixed Mortgage Rates Withdrawn as Increases Continue
Sub-4% fixed mortgage rates have vanished from the market as major lenders like Barclays and NatWest implement rate hikes. This trend follows recent increases from Santander, HSBC, Nationwide, and TSB. While borrowers face rising costs, experts emphasize that rates aren’t skyrocketing, though securing a deal quickly remains crucial.
The Budget’s Impact on the Mortgage Market
The Autumn Budget has thrown the mortgage market into disarray, with rising costs and uncertainty halting progress. Many lenders have been forced to increase rates, and buy-to-let investors are rethinking property investments in favour of stocks and shares. Buyers and sellers are playing a waiting game, as higher taxes and economic uncertainty make even the most committed property enthusiasts pause.
Mortgage Possession Claims Surge by 56% in Q3
According to the published Mortgage and landlord possession statistics: July to September 2024 Mortgage possession claims have jumped 56% in Q3 2024 compared to the same period last year, highlighting the financial struggles many homeowners are facing. With orders, warrants, and repossessions also increasing significantly, experts are concerned about the impact on families and the housing market. The trend is seen across all regions, with London particularly affected, and the average time to repossession has notably shortened.
UK GDP Growth Stalls at 0.1%: A Grim Economic Outlook
The UK economy grew by just 0.1% in Q3, reflecting the ongoing stagnation and uncertainty according to the GDP first quarterly estimate, UK: July to September 2024. Business leaders express frustration, citing the Autumn Budget’s lack of impactful measures and concerns about inflation and rising costs. With growth lagging behind other major economies and tax hikes yet to be fully felt, the outlook for early 2025 remains bleak.
Should the Bank of England Cut Rates in December?
With the UK economy growing by a meagre 0.1% in the third quarter, many experts argue that a rate cut could provide much-needed economic stimulus. While some believe a reduction could boost consumer spending and confidence, others caution that inflationary pressures from the recent Budget may prevent the Bank of England from taking swift action. Balancing economic stagnation against the risk of inflation remains a critical challenge for policymakers as December approaches.
Housing Market Shows Gradual Growth Amid Demand Surge
The October 2024 RICS Residential Survey reveals steady improvements in the housing market, with new buyer enquiries marking four consecutive months of positive growth. Sales volumes have also risen for the third month in a row, although the momentum remains modest rather than dramatic. Experts highlight that despite challenges like rising bond yields and lending conditions, market sentiment is bolstered by increased appraisals and buyers returning, anticipating favourable opportunities.
Swap Rates
Swap rates have experienced minor fluctuations over the past week, reflecting ongoing shifts in the market. As of 14 November 2024, the 2-year swap rate has risen slightly to 4.218%, up from 4.213% last week (an increase of 0.005%), though it is still 0.479% lower than in November 2023. The 5-year swap rate saw a small dip to 4.009%, decreasing by 0.001% from 4.010% last week, yet it remains 0.262% higher than last month and 0.178% lower year-over-year.
| Swap Rate | 07-Nov-24 | 08-Oct-24 | 08-Nov-23 |
|---|---|---|---|
| 2 Year | 4.213% | 4.039% | 4.736% |
| 5 Year | 4.010% | 3.794% | 4.205% |
Mortgage News – 11th November 2024
Last week several lenders, including Halifax, Virgin Money, and The Mortgage Works, increased rates, while TSB adjusted theirs with a mix of hikes and reductions. Despite a Bank of England rate cut to 4.75%, experts remain cautious about immediate impacts on fixed mortgage rates due to fluctuations in swap rates and economic pressures. Meanwhile, Trump’s U.S. election victory and rising mortgage arrears are adding to the uncertainty, while the increase in chain-free homes presents new opportunities for buyers amid shifting housing dynamics.
Mortgage Rate Changes
- Halifax raised rates by up to 0.25% for selected fixed rates.
- TSB adjusted select residential mortgage rates, with some rate increases for higher LTV products and reductions for lower LTV products.
- Virgin Money increased rates up to 0.20% across their purchase and remortgage ranges.
- The Mortgage Works (Buy to let lender) increased rates by up to 0.25% across their range.
- BM Solutions (buy to let lender) increased rates on selected products.
Halifax – Average house price edges up to hit record high
House prices rose by 0.2% in October, marking a fourth consecutive monthly increase and setting a new peak of £293,999, according to the Halifax House Price Index October 2024. Although annual growth slowed to 3.9% from September’s 4.6%, experts emphasize the housing market’s strength, driven by sustained demand and stamp duty incentives. With Northern Ireland showing the highest annual gains, analysts remain optimistic about future growth, even as economic challenges persist.
Bank of England Cuts Rates by 0.25%: Impact on Mortgage Market
Bank Rate reduced to 4.75% – November 2024, sparking mixed reactions about its impact on the mortgage market. While this decision is positive news for borrowers, experts note that fixed mortgage rates may not drop immediately due to ongoing market volatility and recent Budget-related pressures, though a strong 8-1 vote for the cut could signal further reductions ahead. Lenders are expected to adjust cautiously, with hopes of more affordable borrowing boosting property market activity, but uncertainty remains as global and domestic factors continue to influence economic stability.
Trump wins Us election – Impact on UK Mortgage Rates
Donald Trump’s return to power is stirring economic speculation, with experts debating whether his inflationary policies could slow anticipated Bank of England rate cuts. While some predict upward pressure on UK mortgage rates, others emphasize that cautious, gradual base rate reductions were expected for 2025 regardless. The Bank of England faces a delicate balancing act, managing inflationary pressures from both Trump’s policies and domestic factors like the recent spending-heavy Budget.
Increase in Chain-Free Homes as Landlords Exit the Market
Zoopla reports that 32% of homes currently listed for sale are chain-free, largely driven by landlords and second home owners selling off properties in response to financial and legislative pressures. Following the Budget, 41% of two-bedroom homes are chain-free, particularly in regions like the North West and South West, offering buyers a faster and simpler purchase process. Experts note that rising costs, stricter regulations, and potential tax hikes are prompting many landlords to leave the market, making this an opportune moment for buyers seeking chain-free options.
Rising Mortgage Arrears Push Borrowers to Credit for Payments
New data shows growing financial strain on UK mortgage holders, with one in four using credit to cover mortgage payments. UK Finance reports (Mortgage arrears and possessions Q3 2024) an 8% increase in mortgage arrears and a 39% rise in possessions year-on-year, while StepChange reveals mortgage arrears averaging £9,657 per client, up 68% from last year. Despite anticipated interest rate reductions, many homeowners are struggling with high fixed-rate payments and turning to debt, prompting calls for lenders to offer more support and for affected individuals to seek advice.
Swap Rates
Swap rates show a slight decline from the previous week, despite recent upward trends over the past month. As of 7 November 2024, the 2-year swap rate stands at 4.213%, down from 4.244% last week (a decrease of 0.031%), yet it remains 0.523% lower than its level in November 2023. The 5-year swap rate has also dipped to 4.010%, a 0.018% decrease from 4.028% last week, though it has risen 0.216% from last month and is still 0.195% lower than a year ago. These fluctuations indicate shifting market dynamics following the recent Budget, potentially influencing mortgage pricing in the near term.
| Swap Rate | 07-Nov-24 | 08-Oct-24 | 08-Nov-23 |
|---|---|---|---|
| 2 Year | 4.213% | 4.039% | 4.736% |
| 5 Year | 4.010% | 3.794% | 4.205% |
Mortgage News – 4th November 2024
Last week we saw the Budget announcements, with lenders adjusting mortgage rates across the board. Banks like Virgin Money and Nationwide have raised rates, while Santander has introduced cuts, reflecting an unstable rate environment influenced by rising swap rates and economic policies. Additionally, measures in the Budget, including increases in Capital Gains Tax and Stamp Duty surcharges for buy-to-let properties, signal the government’s push toward first-time buyer support and sustainable housing growth, though some experts warn of potential challenges for investors and landlords.
Mortgage Rate Changes
- Barclays brings 2-year fixed rates below 4% for borrowers with a 40% deposit, with rates reduced by up to 0.26%.
- Nationwide raises selected fixed rates by up to 0.15%, aiming to manage service levels after a surge in market demand, while experts note frequent rate changes due to significant upcoming events like the UK Budget, US election, and Bank of England policy decision.
- TSB raises mortgage rates by up to 0.25% across various products including for movers and remortgages.
- Virgin Money became the first lender to raise mortgage rates post-Budget, increasing selected fixed rates by up to 0.15%.
- Santander announces rate cuts of up to 0.36% post-Budget ,on fixed mortgages, despite rising gilt yields and swap rates.
- Coventry Building Society is set to increase fixed rates across residential and buy-to-let mortgages for both new and existing borrowers, with new products launching 5 November.
- Virgin Money raised fixed mortgage rates across purchase, remortgage, buy-to-let, and product transfer options, with increases of up to 0.15%
Nationwide: UK House Prices Edge Upward, But Growth Likely to Stall
UK house prices rose by 0.1% in October, while annual growth slowed to 2.4% from September’s 3.2%, according to Nationwide’s report Annual house price growth slows in October. Despite this modest rise, Nationwide’s Chief Economist, Robert Gardner, cautioned that this may be the last increase for 2024 due to recent Budget announcements. Gardner also noted that strong labour market conditions have supported the market, but affordability challenges may limit further growth in the months ahead.
Autumn Budget 2024: Impact on the Housing Market
Chancellor Rachel Reeves’ first Budget included over £5 billion in investments to boost housing development, with £3.1 billion allocated to expand affordable housing. Additional support includes £3 billion in guarantees for small house builders to increase supply and financing. However, the Budget also reduces the Stamp Duty threshold for first homes to £300,000 from April 2025, meaning 20% of first-time buyers will face Stamp Duty costs. Key tax changes include an increase in Capital Gains Tax rates for investors and a 5% Stamp Duty surcharge on second homes, intended to ease first-time buyer competition and promote sustainable housing growth.
Stamp Duty Surcharge Increase Puts Buy-to-Let Market at Risk
The Chancellor’s announcement of a 2% increase in the Stamp Duty Land Tax (SDLT) surcharge for second homes and buy-to-let properties, bringing it to 5%, has sparked concern among property market experts. Many predict the change could destabilize chains involving buy-to-let purchases, potentially causing deal collapses that impact numerous buyers. Experts warn that this move may discourage landlords, further straining the private rental sector at a time when alternative housing solutions are limited.
Capital Gains Tax Hike Signals Hostility Toward Investment
In Labour’s first Budget in 14 years, Rachel Reeves announced an increase in Capital Gains Tax, raising the lower rate to 18% from 10% and the higher rate to 24% from 20%, aimed at generating £2.5 billion in revenue. These changes align capital gains tax rates on most assets with those for property, which will also remain at 18% and 24%. Experts argue that this increase sends a discouraging signal to investors, potentially dampening future investment in the UK.
High Rental Burden for Tenants in England and Wales
A recent report from the Office for National Statistics (Private rental affordability, England and Wales: 2023) highlights the financial strain on private renters, with tenants in England spending an average of 34.2% of their income on rent compared to 27.2% in Wales, as of the financial year ending March 2023. The burden is especially pronounced in areas like London, where average rents consume over 30% of household income, peaking at 57.2% in high-cost boroughs like Kensington and Chelsea. In contrast, more affordable regions include the West Midlands, the North East, and Yorkshire and The Humber, where rent as a percentage of income remains below the national average.
Surge in Mortgage Approvals Signals Strong Demand
According to the Bank of England Money and Credit – September 2024 In September, mortgage approvals for home purchases rose to 65,600, the highest level since August 2022. Remortgage approvals also increased, while net borrowing of mortgage debt by individuals dropped to £2.5 billion, and effective interest rates on new mortgages fell slightly to 4.76%. Brokers attribute this growth to the availability of lower summer mortgage rates, though they caution that Budget could impact this momentum.
Swap Rates
Swap rates reveal an upward trend from the previous week, with both 2-year and 5-year rates reflecting notable increases. As of 31 October 2024, the 2-year swap rate stands at 4.244%, a rise from 4.077% last week (up nearly 0.17%), though it remains 0.639% lower than its level in November 2023. Similarly, the 5-year swap rate has climbed to 4.028% (up 0.42%) from last week’s 3.606%, marking a decrease of 0.391% year-over-year. These changes highlight an adjustment in market expectations, especially following last week’s budget announcement, suggesting a potential increase in mortgage pricing over this week.
| Swap Rate | 31-Oct-24 | 01-Oct-24 | 01-Nov-23 |
|---|---|---|---|
| 2 Year | 4.244% | 3.850% | 4.883% |
| 5 Year | 4.028% | 3.552% | 4.419% |
