The Bank of England today opted to raise the interest rate to 0.5%. Activity in the mortgage market remains above pre-pandemic norms following two remarkable years in the property market and lenders are issuing new products and services in a bid to secure market share. In this article, our experts walk you through the key trends in mortgage borrowing, from the path of interest rates, to buy-to-let and holiday lets.
0.5% - The base rate has increased today
The Bank of England’s decision to move the base rate to 0.5% represents its first back-to-back hike since 2004 and there is likely more to come this year.
Simon Gammon, our Managing Partner, says, "Mortgage rates are holding relatively steady for the time being, but this is likely to be a temporary reprieve. Mortgage rates will inevitably move upwards in tandem with the base rate in the months ahead.
"About a fifth of all mortgage debt – to the tune of about £300 billion – is held on variable rate mortgages, so we expect increasing numbers of homeowners to move to fixed products during the months ahead."
Whether you are due to remortgage imminently, or in a few months, it’s wise to get your financial affairs in order sooner rather than later. Mortgage offers can be locked in as long as six months in advance.
71,000 – the number of mortgages issued to home purchasers during December was up 6% compared to the pre-pandemic average
Banks issued 71,000 loans to home purchasers during December, outstripping the pre-pandemic monthly average of 66,700.
Hina Bhudia, Partner in our Private Office, said: "Lending would have been even higher were it not for a severe shortage of properties for sale that has weighed on activity for many months.
"There is no shortage of demand from both purchasers and those looking to remortgage, before the Bank of England raises the base rate once again. This could happen before the summer, depending on the momentum of the economy.
"There are some tentative signs that supply is improving, which is great news for prospective property purchasers. The number of market valuation appraisals conducted by Knight Frank in the week starting 17th January was the sixth highest figure recorded over the last ten years."
25% - the increase in the number of holiday let mortgage products since September 2021
Travel restrictions during the pandemic have driven a renaissance in domestic holidays. Transaction data suggests the allure of property in the UK’s beauty spots remains undimmed, despite the return of overseas holidays.
"Lenders have responded with a raft of attractive products. Holiday let investors now have 231 products to choose from, up 25% since September 2021. With the lenders eager to build their share in this growing market, we expect competition to drive further choice in the holiday let mortgage market over the course of 2022," says Tim Woods, Head of Country Here at Knight Frank Finance.
3,528 – the number of mortgage products available to landlords in January 2022, the most since 2007
After being squeezed by tax rises and regulatory changes in recent years, landlords now have more products to choose from than at any time since 2007.
Huy Le, Landlord Finance Specialist says, "Data from Moneyfacts reveals a broad recovery in the number of products on offer, including to landlords with smaller deposits or relatively low levels of equity, which suggests the lenders are particularly bullish on the sector."
Get more insights on the year ahead for the buy-to-let market.
£4.8 billion – the value of property wealth accessed by older borrowers during 2021, a record amount
Double-digit house price growth and the adoption of equity release by wealthy homeowners made 2021 a record year for the sector. Homeowners withdrew £4.8 billion, beating the previous record of £3.94 billion set back in 2018.
David Forsdyke, Head of Later Life Finance says, "House prices have soared 25% during the most recent five-year period and older homeowners are seeking ways to put that wealth to work, whether to gift money to relatives, invest in home improvements or take the trip of a lifetime."
To hear more from our team on what to expect for your mortgage in the months to come, watch our latest webinar on-demand.
Sources: The Bank of England, Moneyfacts, The Equity Release Council
If you would like to discuss your mortgage options, in light of any of these trends, please do contact our expert team who would be delighted to help. You can email us at info@knightfrankfinance.com, call us on 020 7268 2580 or request a consultation online.