In the latest report from Nationwide, the February data revealed the first annual house price increase in more than one year. There was a 1.2% increase in the average house price for February 2024 over February last year. This comes after a decline of 0.2% in January. It is a stronger housing market report than forecasted by several experts including the economists poll completed by Reuters with an expectation of a 0.3% month on month increase and a 0.7% annual increase.

The average house price is reported by Nationwide to be £260,420.

The upward movement in the housing market is considered to be fueled by the competitive lending market that emerged at the end of January into February. Despite the Bank of England’s Monetary Policy Committee (MPC) holding the standard base interest rate at 5.25% for the fourth consecutive meeting in February, lenders lowered their rates. 

Lenders felt confident inflation was on a downward trend and borrowers were less of a risk for them in lending. However, inflation has held stubbornly at 4.0% since December after the slight increase from 3.9% reported in November. 

Most lenders joined the competition for the attention of home buyers as well as homeowners shopping for remortgages. There were more mortgage products on the market with lower rates, but there were also attractive remortgages available. The rates dropped in some offers below the base rate of 5.25%. 

The opportunity to borrow at rates below what would have been expected with a tick upward in inflation and the MPC holding their base rate steady was something hopeful home buyers apparently didn’t pass up. The housing market in turn experienced a slight boost. 

The demand in the housing market is good news for homeowners seeking a remortgage that might have been in danger of facing negative equity and being out of reach of a new deal. The ability to remortgage when a homeowner is in need of a deal following the end of their mortgage term is essential for some to be able to afford their repayments. 

In negative equity, when property value declines below the debt level, it prevents the ability to remortgage, and the homeowner is then at the mercy of a lender’s standard variable rate (SVR). Avoiding a SVR is often the best choice as it could be a much higher interest rate than what is available with a remortgage.

Avoiding a SVR is certainly a smart strategy for homeowners coming off of a two-year fixed term obtained in 2022. In January and February of 2022, the Bank’s base rate was only 0.25%. In March 2022, the MPC voted the rate to 0.50% which is far from the current rate of 5.25%. Having paid two years at such an affordable rate to face deals offered when the base rate is at an over fifteen-year high is difficult.

The possible fall out of having a large number of newer homeowners, with little built up equity to protect them from negative equity, becoming a prisoner of a SVR is why many experts have called upon the MPC to cut the rate no matter where inflation sits. The danger of negative equity and affordability issues for homeowners was seen as a greater threat to the economy than inflation impacting for longer than hoped.

The good news is that with demand growing in the housing market there is less of a risk of property values declining and offers a bit of a safety net to keep homeowners out of negative equity. 

Because so many homeowners are going to be coming to the end of their mortgage term this year, the data release from Nationwide offers good news in the hopes that property values will stay elevated, and the threat of negative equity is lessened if not fully averted.

Homeowners are being encouraged to shop for a remortgage to discover what offers are available. It is simple and quick to obtain remortgage quotes. A homeowner could visit the website of a remortgage broker and could be offered numerous quotes from a variety of lenders. Brokers also could offer exclusive deals not available directly from lenders to borrowers. There is also the option to go from website to website of remortgage lenders to gather quotes.

Once quotes are in hand, a homeowner has valuable information in which to create a strategy to save money, to lock in a remortgage with a fixed rate to guard against rising rates, and to avoid the risky SVR. 

The next MPC meeting and the next inflation report are days away and the current lending environment could change as rapidly as the competitive environment emerged and began to disappear only weeks ago. Homeowners available to benefit from the current opportunities should shop for a remortgage sooner rather than later for the best remortgage deal available.