Rising mortgage rates main blocker for buyers
7th October 2022 07:40
by Myron Jobson from interactive investor
interactive investor comments on the latest Halifax House Price Index.
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “After an extended period of home values shattering one record after another, property prices are cooling - even retreating. The slight fall in the average UK house price in September marks the second marginal decrease over the past three months.
“With runaway house price growth seemingly running out of steam, rising mortgage rates are increasingly becoming the main blocker for buyers seeking to get on the property ladder and those hoping to move up it.
“Mortgage affordability is a mushrooming pain point for buyers. Mortgage rates have been on the up in line with increases to the Bank of England’s base rate, but rates have typically spiked by between one and two percentage points two weeks on from the mini-Budget. The difference amounts to hundreds in pounds and pence terms, and it means that buyers can’t afford as much as they could 14 days ago.
“Many lenders withdrew mortgages for new customers in the fallout of what was dubbed a ‘fiscal event’ because of the sharp rise in gilt yields, which they use to price fixed-rate home loans. Some lenders have not returned to the market (as yet), while others have reappeared with higher rates.
“The mortgage marketplace remains precarious for buyers. Mortgage rates are changing on a daily basis so it’s important for buyers to keep calm.
“The spike in mortgage rates in tandem with rampant inflation could result in a more acute property market slowdown in the coming months. The evidence points to house prices dampening rather than tumbling as the laws of supply and demand are likely to continue to prevail. The weaker pound could also fuel interest from foreign investors, which could exacerbate the supply-demand mismatch.”
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