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Antony Antoniou – Luxury Property Expert

Interest Rates on Hold More Good News

Interest Rates on Hold More Good News

The Latest on Inflation, Mortgage Rates, and the UK Housing Market

The last couple of days have brought some cautiously optimistic news on the inflation and mortgage rate fronts in the UK. After a prolonged period of seemingly endless increases, we may finally be turning a corner. However, the situation remains precarious across financial markets, and unknown events could rapidly change the outlook again. In this post, I’ll summarize the key points and provide my take on what it means for mortgage holders and homebuyers.


Inflation Falls Slightly in August

The latest inflation figures for August showed a small 0.1% decline compared to July. While minor, this was actually better than expected – economists had forecast a rise due to increasing oil prices. Core inflation, which excludes volatile food and energy prices, fell a more substantial 0.5%.

This slight easing of inflationary pressures is a welcome sign, though overall inflation remains extremely high at 9.9%. It indicates the Bank of England’s interest rate hikes over the last year may finally be having some impact in dampening spiraling prices. However, there are no guarantees this downward trend will continue, given the myriad global factors affecting UK inflation.

What Does This Mean for Mortgage Rates?

With inflation tentatively moving in the right direction, mortgage lenders may start competing more aggressively on rates again in the coming weeks. We’ve already seen the first sub-5% fixed rate mortgage appear recently, albeit with a high fee.

I expect more competitive deals to emerge soon, perhaps even fixed rates below 4.5% before the end of 2022 for some borrowers. However, it’s impossible to predict exactly when or how much rates could fall. The interbank lending markets which determine fixed mortgage pricing remain on edge. Even a modest rise in swap rates could quickly push mortgage rates back up again.

When to Remortgage?

Many homeowners face the difficult decision of whether to remortgage now or hold off for potentially better deals in the near future. Unfortunately, there is no simple answer, as the markets are simply too uncertain. I caution against relying on any supposed expert predictions, as nobody can foresee all the variables at play.

The best advice is to speak to your broker frequently for updates on new products and rate movements. That way, you can make an informed decision if an appealing new deal emerges that suits your needs. Be prepared to act fast, as competitive rates can disappear quickly. Consider your own risk tolerance and unique circumstances. While waiting could pay off, fixing now provides certainty.

Impact on the Housing Market

For current homeowners without immediate remortgage needs, inflation trends don’t directly affect affordability. However, buyers relying on mortgages will face challenges. Rising rates have already crimped purchasing power, slowing the market.

Sellers still clinging to unrealistic expectations are being ignored. Properties must be priced competitively to attract interest and offers in this environment. Shock and awe pricing is advisable for motivated sellers.

First time buyers with small deposits should be very cautious about overextending, even if they see bargains. The market likely faces further downwards pressure as rates remain elevated. Trading up may be easier for those able to sell at lower prices to move.

Key Takeaways

Inflation eased slightly in August, but remains extremely high
– Mortgage rates may start falling again soon if inflation continues descending
– Impossible to predict exactly when competitive remortgage deals will emerge
– Speak to a broker frequently to stay updated on new products and rate shifts
– Be ready to act fast to lock in favorable deals when they appear
– Housing market still faces affordability challenges from higher rates
– Sellers must price realistically to sell; first time buyers should be cautious

The recent inflation data provides some tentative hope that we’re past the peak, but the situation remains very fluid. Stay tuned for further updates on how mortgage rates and the housing market respond in the coming weeks and months.

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