For the third consecutive month through June, the UK housing market has been subdued according to Halifax. Home buyers have stepped away from homeownership at the moment. There are specific factors at play such as elevated asking prices that have remained following record-breaking highs month after month that occurred during the pandemic when borrowing was historically cheap. Also, the more expensive interest rates from lenders, which though could be viewed as below normal, are much higher than what were available during the pandemic. There is also a lower supply of properties available which makes buyers competitive and shuts out those who find the higher prices and costlier interest rates a barrier to affordability. 

There is no doubt that the stress levels for some homeowners have been running high. This is likely most true for those leaving behind historically low interest rates as they come to the end of their term in 2024. During the pandemic, the Bank of England’s Monetary Policy Committee (MPC) lowered the standard base interest rate to the lowest in the Bank’s history to almost zero at 0.1%. It reached this low in March 2020 and was the last time a cut has been made by the MPC. Due to inflation, the MPC began increasing the rate in December 2021 and it grew to 5.25% by August 2023.

According to the most recent data from Nationwide, house prices are up 1.5% in comparison to the same time last year. Continued high prices in the housing market and high interest rates have made it difficult for home buyers. Affordability is an issue for those hoping to climb on the property ladder, and despite there being hope for the Bank of England’s Monetary Policy Committee (MPC) to cut the standard base interest rate, it will not likely open an easier path to homeownership. The ability to afford a home in the UK has become more difficult, even though the economy has survived double digit inflation to finally reach target of 2.0%, interest rates are not expected to increase but begin decreasing, and wages have grown.

The latest data for remortgaging in the UK was released by LMS and revealed as expected that monthly repayments have increased for homeowners. There are millions of homeowners in need of a remortgage this year as their mortgage term is ending. Without a remortgage deal, they will be transitioned to their lender’s standard variable rate (SVR) which is normally a higher interest rate. Avoiding a SVR is the best strategy for saving money and stepping away from the risk of an interest rate rising in the years ahead as a SVR is not associated with a set term. Only a remortgage can offer a fixed interest rate locked in for the term the homeowner desires.

Hopeful home buyers had hoped the upcoming election would impact the housing market and their dreams of becoming a homeowner would be made an easier endeavor. The result, however, is less than expected and according to the online property listing website, Rightmove, house prices are not likely to decline to the levels that would make home buying more affordable. The average house price remains near the record high in June, and the Bank of England’s Monetary Policy Committee (MPC) voted this month to keep the standard base interest rate steady at 5.25%. Asking prices are high and so are interest rates, yet home buyers remain.

The last few years have been difficult for homeowners. In the blink of an eye, the Bank of England’s standard base interest rate grew from 0.10% to 5.25%. This put homeowners facing much higher interest rates when their mortgage terms ended, and they shopped for a remortgage. While choosing a new deal from lenders would offer vastly different choices than before, a remortgage is still the path to savings as avoiding a standard variable rate (SVR) is the best option. Allowing a lender to move their loan if bypassing a remortgage could have the homeowner paying more than necessary on a SVR.