Mortgage Rates in Limbo: When Will We See a Shift?
The UK housing market is in a state of flux, and it’s all because of those pesky mortgage rates. Last week, the average two-year fixed-rate mortgage (75% loan-to-value) was 5.19%, according to the Bank of England. That’s a far cry from the 4% mark that would signal a stronger demand in the market. But when can we expect to see a shift?
The UK housing market is in a state of flux
Services inflation is still high, and the Bank of England is hesitant to cut the base rate from its current level of 5.25%. Savvas Savouri, chief economist at QuantMetriks, believes that services inflation is unlikely to fall below 5% until early next year. However, he notes that political events could force the Bank of England’s hand, leading to a potential rate cut sooner rather than later.
The Impact of Inflation
Inflation is a major player in the mortgage rate game. The recent services inflation report showed a higher-than-expected reading of 5.7%, which is why the Bank of England felt unable to cut the base rate. But what does this mean for the housing market?
Inflation is a major player in the mortgage rate game
According to Simon Gammon, head of Knight Frank Finance, the average margin for a mortgage lender is 0.3 percentage points, which is much lower than the 1 or 1.5 percentage points it used to be. This means that lenders are trying to stimulate the market, but it also means that mortgage rates are fluctuating more frequently in response to fresh economic news.
The Future of Mortgage Rates
So, what does the future hold for mortgage rates? Will we see a shift towards lower rates, or will they continue to hover around the 5% mark? It’s difficult to say, but one thing is certain: the UK housing market is in for a bumpy ride.
Mortgage rates are fluctuating more frequently
With inflation and employment data on both sides of the Atlantic having a strong bearing on the market, as well as any inflationary signals from a new UK government or political volatility around the US election, it’s anyone’s guess what will happen next. One thing is for sure, though: it’s going to be a wild ride.
The UK economy is in for a wild ride
