The Summer of 2023 has joined the same status as the post summer season before the 2008 economic crash. According to the recent report from Rightmove, the 0.5% post summer increase of homes on the market is the smallest in 15 years. The average new asking price in the month to October 7 was £368,231. The annual average asking price to October 7 declined by 0.8%, which is seen as a direct result of the higher interest rates offered by lenders.

In another report on the housing market, Halifax reported the fastest decline in the average annual house price in 14 years in September. 

The reports are an insight into not only what sellers believe the housing market can bear, but also as to what hopeful home buyers are willing to risk in the current market by buying now.

The difference in the number of agreed house sales this year compared to one year ago is a decline of 17% according to the Rightmove report. 

This time last year, interest rate offers were on the rise, but they were still much lower than they are now. The standard base interest rate set by the Bank of England’s Monetary Policy Committee (MPC) has risen to 5.25%. In October 2022 the base rate was 2.25% and in October 2021 it was almost zero at 0.1%.

In December 2021, the MPC made the first increase that would continue throughout the next thirteen meetings. In all, fourteen meetings resulted in a majority vote to increase the base rate, and yet inflation is still more than three times the target rate of 2.0% set by the Bank. There are some experts, including the governor of the Bank, Andrew Bailey, that believe the current rate is the peak rate needed to tame inflation, so much so that he was the deciding vote in the last MPC meeting to keep the rate steady and break the fourteen meeting rising streak.

There was not a rate change in September, and there is not a meeting in October. The next two, and last meetings for the year are scheduled for 2 November and 14 December. The first meeting of next year will be on 1 February. With spending due to increase because of the holiday season and colder weather on the horizon due to winter, inflation could set in and be more stubborn than expected. If so, the rate could be increased again to a new and higher expected peak interest rate.

At 5.25%, the base rate is the highest it has been since the economic crisis of 2008, and there are those that believe the negative impact on households is yet to peak no matter when the base rate peaks. Spending is slowing, as was needed, and expected, due to inflation and the resulting higher interest rates, but there are those that have already spent and are having a hard time continuing to do so and they are homeowners.

Homeowners that purchased their home in 2021 and secured a fixed rate two-year mortgage have been shielded from the MPC rate hikes. They have remained paying on a mortgage rate shaped by the historically low base rate of 0.1%. For some, they secured rates on their property loan that when offered was the historically low rate for the lender. 

Coming to the end of their fixed rate mortgage, their interest rate will disappear. They will either choose to remortgage to a rate of their choice from the current offerings, or they will be moved to their lender’s risky and more costly standard variable rate or SVR. 

For some, it will be the start of a quick spiral into arrears. Affordability could be a sudden and unexpected consequence to their mortgage term ending due to the higher base rate.

The changes in the housing market demand, asking prices, and the average house price, and the expectation of inflation continuing for months to come could see lenders feeling the risk in lending and tightening their offers. It could mean fewer options on the market and an increase in rates even if the MPC holds the base rate steady.

Homeowners are encouraged to get familiar with their current mortgage deal. Know when the term is due to end, understand your options when it does and know how soon the homeowner can choose a remortgage before it ends without taking on a penalty. 

For some, the information to ask is how much is the penalty if the term is ended early, because remortgaging now versus when lending is tighter and perhaps not as friendly or as affordable should rates rise could mean paying more than necessary. 

Shopping for a remortgage at any time in one’s mortgage term is smart. The information could be a great help in creating a strategy to save money over a SVR while rates are high or could rise, and when the economy is struggling.