The average house price fell for the fourth consecutive month in July according to Halifax. More expensive borrowing costs are being blamed for the decline in demand from home buyers. First time buyers are considering homes much smaller than two years ago when lender’s interest rates were at historically low levels. In some cases, they are putting their homeownership dreams on the shelf. The average house price dropped annually by 2.4%, and while that could have made property buying more affordable, any savings were erased by higher interest rates in mortgage offerings.

The monthly decline was 0.3% in July to £285,044. It is significant that the average house price peak of £293,992 occurred last August.

Perhaps there was good news that the annual rate decline did slow from last month, which was 2.6% in June.

Halifax expressed that the UK housing market was still showing resilience as demand has remained in the market when most experts thought there would be a major exodus of home buyers.

Kim Kinnaird, Halifax Mortgages Director, remarked, “In particular, we’re seeing activity among first-time buyers hold up relatively well, with indications some are now searching for smaller homes, to offset higher borrowing costs.”

She added, “Several factors are providing support, notably strong wage growth, running at around 7% annually. And, while the uptick in unemployment is likely to restrain that somewhat, it seems unlikely to reach levels that would trigger a sharp deterioration in conditions.”

The Bank of England’s Monetary Policy Committee (MPC) pushed the standard base interest rate to 5.25% last week in the fourteenth consecutive meeting with a rate hike of 0.25%.

Kinnaird responded to the MPC rate increase saying, “Expectations of further base rate increases from the Bank of England were tempered by a better-than-expected inflation report for June. However, while there have been recent signs of borrowing costs stabilising or even falling, they will likely remain much higher than homeowners have become used to over the last decade.”

Experts believe there will be several more rate hikes to come as inflation is not due to reach target rate of 2.0% until 2025.

Home buyers are not the only group being impacted by the higher borrowing rates. Homeowners, too, are impacted when rates increase. Those on variable or tracker rates are subject to face rising borrowing costs. Homeowners coming to the end of their mortgage deal will lose their previous rate and be forced to choose from current rates. 

A remortgage is considered the smartest strategy as a homeowner could escape their lender moving them to their standard variable rate (SVR) at the end of their term. A SVR is normally a higher interest rate than what could be found with a remortgage. A SVR could be double or more the rate offered with a remortgage.

By avoiding a SVR, a homeowner could save money. Choosing a fixed rate remortgage could offer a shield from further rate hikes and save even more.

Shopping online for a remortgage is quick and easy. Remortgage brokers often offer exclusive deals from lenders not offered directly to borrowers. Homeowners could also receive many quotes from a variety of lenders to review and compare from a remortgage broker website. Homeowners could also go to specific remortgage lender sites to gather quotes to review and compare.

Homeowners will also be impacted by a slower housing market if property values begin to decline. This will take away built up equity in the homeowner’s property. It could put them in negative equity and keep them from having the ability to remortgage or lower their loan to value LTV to a level that prevents them from getting the best remortgage offers.

Currently, the market is resilient according to experts like Ms. Kinnaird, and for homeowners that is some good news deserved amid their dealing with higher rates, inflation, and the threats of declining property values. Meanwhile, taking advantage of the ability to remortgage and save money to protect the household budget should not be overlooked.