Are we starting to see a positive turn for mortgage rates?
Article written by Nick Wood, Director
There is a saying that “a week is a long time in politics”. Over the last month, I have had enough of politics to last me a lifetime! It doesn’t seem possible but it was only on the 23rd of September that Kwasi Kwarteng sent the mortgage world into chaos with his mini-budget.
Within a few days of his announcement, the price of fixed rates soared to around 6% and lenders were forced to constantly reprice their products without giving any prior notice, and some even temporarily pulled out of the market entirely. At iMAB we found ourselves inundated with calls and emails from clients worried that their offer might be withdrawn or checking to see if they could reserve a new rate sometimes months or even years before their current deal was due to expire.
Six weeks later we have a new prime minister, Rishi Sunak, and a sense of stability has returned to the financial markets. The price of fixed rates has dropped back to around the 5% mark and could fall even further.
It, therefore, looks like the market is getting back to normal again but maybe I should say back to the “old” pre Credit Crunch normal with fixed rates at 4-5% rather than the “new” normal of 1-2% we saw during the pandemic.
The fixed rates on offer during lockdown were the lowest ever and were only available due to the unique and tragic circumstances we all found ourselves in. We were always going to see interest rates edging back up again at some point and so it wasn’t the extent of the change in pricing that shocked everyone, it was simply the speed of that change.
Although higher interest rates may mean buyers will have to adjust their budget and their expectations accordingly, the good news is that people still want to move and lenders still have money to lend. We are already seeing more enquiries from clients looking to buy their next home. Hopefully, that’s a sign that the property market in 2023 could be stronger and busier than some economists predicted at the start of October.