Mortgage Rates and Homeownership: The Current State of Affairs

The UK housing market is facing a challenging time, with rising mortgage rates and increasing arrears among homeowners. According to recent research, the number of homeowners in arrears has risen by 3% in the first quarter of 2024, with 96,580 mortgages in arrears of 2.5% or more of the outstanding balance.

Homeowners struggling to keep up with mortgage payments

The impact of the cost of living on mortgage repayment affordability cannot be ignored. Although inflation has dropped to 2.3%, consumers are still reeling from its peak of 11.1% in October 2022. The price of goods, fuel, and utilities are still rising, making it difficult for homeowners to keep up with their mortgage payments.

“When you overlay inflation with mortgage rates, it isn’t a pretty picture. Borrowers are now resigned to the fact that home loans with 2% interest are a thing of the past and that rates of between 4-5% are the new normal.” - Jason Harris-Cohen, LandlordBuyer

In addition to rising mortgage rates, homeowners are also facing the challenge of finding a logical balance between effort and profit. Running a buy-to-let has never been more involved, with complex compliance and strengthening tenants’ rights. This is in tandem with zero mortgage interest tax relief, increasing running costs, and arrears that have risen 24% in the year to April 2024.

Mortgage rates on the rise

In an effort to make homeownership more accessible, Vistry East Anglia has partnered with Own New to offer lower mortgage rates for home buyers. The scheme, called Own New Rate Reducer, uses the housebuilder’s incentive budget to access lower mortgage rates with lenders, reducing the customer’s monthly mortgage payments over a fixed term.

Vistry East Anglia partners with Own New to offer lower mortgage rates

The future of mortgage rates is uncertain, with swap rates becoming more volatile. However, there is a glimmer of optimism that mortgage rates may dip below 4% during the remainder of 2024.

In conclusion, the current state of mortgage rates and homeownership is challenging, but there are efforts being made to make homeownership more accessible. As the situation continues to evolve, it is essential for homeowners and potential buyers to stay informed and adapt to the changing landscape.