In another sign that the housing market is changing, the latest news from British homebuilders is the plan to build fewer homes as they expect high mortgage rates to slow down demand. The lack of first-time buyers is likely to be the most absent group from the housing market. Not even government schemes that have helped in the past to put home buyers into new starter homes such as the Help to Buy scheme would be enough to make buying affordable, so say experts.

First time home buyers will be sorely missed from the market as they are the group that could put a quick and hard slowdown onto the housing market. Without the first-time buyers seeking starter homes, there is less ability for homeowners to sell their properties and upgrade. Without those buying and moving to an upgraded home, there is less ability for a homeowner to sell and downgrade, which would be the case for empty nesters and pensioners. The housing market could stall.

The lack of demand in the housing market could result in a decline in property values for homeowners. The result could cause many homeowners to fall into negative equity and lose the ability to remortgage, which is the one thing that could help homeowners save money.

Higher interest rates are causing an issue for homeowners as well. 

Homeowners coming to the end of their mortgage term must choose between a remortgage or allowing their lender to move them to their standard variable rate (SVR). Bypassing the SVR for a remortgage could save homeowners a substantial amount of money. A SVR could be double or more the rate found with a remortgage. Also, a fixed deal to lock in the interest rate could save more money as the homeowner avoids any further rate hikes and only with remortgaging is a fixed option available. 

The Bank of England’s Monetary Policy Committee (MPC) is expected to increase the standard base interest rate to over 6% before inflation draws closer to the target rate of 2.0%. The current inflation rate is 7.9%, which is almost four times the target rate. 

The base rate was increased by 0.50% in the last MPC meeting which was held in June. The next meeting which is scheduled for August could result in another 0.50%. The current rate is 5.0%, which has grown with a majority MPC vote to increase the base rate during the last thirteen consecutive meetings.

Because the rate will likely see another or several increases, experts are encouraging homeowners to shop for a remortgage if they are getting close to their mortgage term ending. This would also be important for those that have already been moved to a SVR. Of course, even homeowners that are not close to having their term end could shop for a remortgage to gather information to prepare or perhaps choose to end their term early.

Some homeowners have chosen to take on a penalty to end their mortgage term early. It allows the homeowner to choose from current interest rates rather than possibly face higher ones when their term would normally end.

Homeowners are facing higher interest rates and now they could lose property value. Those homeowners without enough equity to withstand the declines could end up in negative equity and lose the opportunity to save money with a new deal.

Of course, the housing market could surprise experts once again. It remained strong throughout Brexit and totally surprised during the pandemic with record breaking house prices many times over. Home buyers might stay motivated, the government might initiate an incentive or help to keep first time buyers within reach of the property ladder, and inflation might take a dive and remove the need for further rate hikes.

While positive outcomes are hoped for, home buyers should prepare and do all they can to save money and protect their household budget. Most could do so simply by choosing a remortgage. Shopping for one is simple to do online as quotes can be gathered to compare and review quickly on the website of a remortgage broker. A broker site could not only offer quotes from a variety of lenders, but they could also offer an exclusive deal not offered directly from lenders to borrowers. Homeowners could also shop online by visiting individual remortgage lenders to gather quotes.

Expecting property value declines could motivate a homeowner to remortgage early or move away from a SVR. Expecting higher interest rates could be the push for a homeowner to remortgage to a fixed rate sooner rather than later to save money. Expecting things to only get better and choosing to sit on the fence waiting for relief to appear is not the choice to make. At least it is not the choice to make if saving money and not paying more than necessary is a goal.