2022: A Market Update

At the beginning of 2022, most people predicted that the next 12 months would be calm for the homebuying market, especially after a busy 2021. But, in reality, the past few months have been a turbulent time in the UK, especially for the mortgage market. The cost of mortgages has already been climbing due to sterling volatility and market uncertainty after the recent political turmoil. The latest inflation figures from the ONS put the cost of living at 10%, a slight decrease from the previous month.

Inflation is soaring across most of the world’s economies as we all face the same challenges; the war in Ukraine has caused an increase in the cost of food, fuel and energy. The conventional response to tackle inflation is to increase interest rates – on December 15th, the Bank of England raised interest rates from 3.0% to 3.5%. The 0.50 percentage point increase marks the ninth rise since December 2021, when the BOE rate was only 0.1%. This raise puts the base rate at its highest since November 2008.

Increasing interest rates also means those on tracker or Standard variable rates (SVR) are getting added pressure on their household expenditure. There are a lot of strains on household budgets: inflation, higher energy costs, and in some cases, many people are still in recovery mode from the impact of the pandemic. Paying more due to rising interest rates is not easy when put on top of an already strained budget. So, what can we do to help?

What does this mean for First Time Buyers?                                                                       

People who are thinking about stepping onto the property ladder and purchasing their first property are asking whether now is the right time, or whether they should wait.

There is no simple answer to that. The property market, like interest rates, changes constantly, with continuous ups and downs. Buying a property is a long-term investment, even if the value of the property goes down after a year or two, it may not affect you if you are planning on living there for a longer time. If you fall in love with a property, and you are in a position to buy, then now could be the right time for you to do so. But always remember, the market is unpredictable, and nobody knows what turn it will take.

What does this mean for remortgaging?

If your tie in period is coming to an end, you should look to remortgage. When your term ends, you can either move your mortgage on to a different fixed or tracker rate, or allow your lender to move your loan to their standard variable rate (SVR). The SVR is usually higher than a lenders fixed or tracker rate mortgages and could cost you hundreds more each month.

So, when your current tie-in period is coming to an end, talk to one of our friendly advisers about your options. We can help to secure you the very best mortgage for your circumstances, up to 6 months prior to your current deal expiry. This allows you to secure the rate now and to avoid any impact from further rate rises, but with the benefit of still allowing you to move to another product or lender should rates reduce in that time.

Conclusion

We do not know what will happen to the market in 2023. If the pound stabilises and inflation calms, the Bank of England could keep interest rates stable, and then lenders may have more certainty, which could then mean we start to see more mortgage products available.

One silver lining during this year was the emphasis placed on the need for Independent, expert advice – our Charles Cameron professional and friendly advisers are on hand to support you and can help you explore all the options available to you.