The UK housing market grew at the fastest rate in nearly two years in September according to data recently released by Nationwide. The average house price grew annually by 3.2% bringing it to £266,094. The strong demand from home buyers is being credited to the recent mortgage interest rate cuts by lenders and rising incomes. The data released by Nationwide reflects their own mortgage lending and not that of the market overall and does not include cash purchases.

The monthly increase in the average house price amounted to 0.7%. 

Nationwide’s chief economist, Robert Gardner, said, “Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters. These trends have helped to improve affordability for prospective buyers.”

Mortgage rates have helped motivate home buyers to enter or return to the housing market. Lenders have created a competitive lending environment, and borrowers are finding it hard to overlook the opportunity to save money. 

The Bank of England’s Monetary Policy Committee (MPC) made a cut to the standard base interest rate during their August meeting. The 0.25% reduction took the sixteen-year high base rate from 5.25% to 5.0%. It was the first rate cut by the MPC since March 2020. In anticipation of the rate cut, which was strongly forecasted, lenders began to cut their own rates. 

The MPC voted to hold the base rate steady in September, but lenders have continued to reduce their offerings. There are mortgages so low they have passed below the 4.0% threshold. Remortgage interest rates have also become more competitive. Lower rates, with some below the base rate, reveal an optimism from lenders in the future economy. Borrowers are not being viewed as much of a risk for lending and thus lower rates continue to be offered despite there only being one base rate reduction by the MPC so far. 

The next opportunity for the MPC to vote for another cut is in November as there is not a meeting scheduled for October. This could be a good thing for borrowers. Though a rate cut will not be voted for in October, neither can the MPC vote to hold the rate steady as they did in September. With the expectation of another rate cut, and October passing without crushing that expectation, lenders should continue to offer their low mortgage and remortgage rates rather than pull them.

This is even more reason for borrowers to take advantage of the current lending market. Home buyers certainly are as evidenced by the growth in the housing market, but homeowners might be holding out for lower rates equal to those found on mortgages. It could have a homeowner missing out and paying more than necessary.

This is especially true for homeowners that are near to the expiration of their current mortgage term or those that have already come to the end of their term and did not remortgage. Without a homeowner choosing a new deal, the lender will move the mortgage debt to their standard variable rate or SVR. This is considered a risky situation for most homeowners. 

A SVR could be double or more the interest rate available with a remortgage. Also, being a variable rate it is subject to change and only a slight increase could put a substantial financial strain on a household budget. 

By choosing a remortgage, a homeowner is avoiding the more costly SVR, and with rates being offered lower than the current Bank’s base rate, there is little reason to wait for better offerings. In addition, the homeowner could have the choice of a fixed rate remortgage and lock in their chosen interest rate and shield their budget from rising rates.

When rates are lowering it could seem the situation of rising rates is near impossible to happen, but it did earlier this year. Lenders were optimistic of an early spring rate cut by the MPC and began cutting their rates and creating a competitive lending market just like exists currently, but when inflation failed to respond as expected and the MPC voted to keep the rate steady, lenders pulled their lowest rate offerings and interest rates increased. 

Rather than miss out on the opportunities available now, homeowners can shop for a remortgage online. Going from lender website to another is one strategy, but shopping with a remortgage broker is easier as the homeowner could quickly and easily obtain numerous quotes from a variety of lenders. Brokers could also have exclusive deals that are not offered directly from lenders to borrowers.

Once quotes are obtained, the homeowner can review and compare quotes to discover what deals are available. They are quite likely to find that offers now mimic the hoped for deals that they are waiting for with another rate cut by the MPC. No one knows when the next majority vote for a rate cut will happen, but it will not be in October, and should it not happen in November either, the best rates of the year could be the ones available now.