The largest hurdle to homeownership is buying in today’s market and it has not been harder to climb the property ladder than it is now. Interest rates are high, despite having declined recently as lenders become more competitive. Asking prices have continued to climb on top of the pandemic lifestyle buying frenzy and supply in the housing market is low. Coming off an inflation stress that reached double digits has made it difficult to save for a deposit.

Many homeowners are coming to the end of their mortgage term this year, or they already have done so. Those that secured a two-year fixed deal in 2022 are likely to experience financial pain at the difference in the cost of borrowing then and now. For at the expiration of their mortgage term their current interest rate will end, and they will either remortgage or their lender will move them to their standard variable rate (SVR). Avoiding a SVR is encouraged by experts because the interest rate will likely be much higher, and more expensive with an SVR than with a remortgage.

Inflation, which had lingered in double digits last year, has now dropped to the lowest level in almost three years. Disappointment has been expressed at the fact that the inflation rate failed to reach the forecast of 2.1%, which would have put it only slightly above the target rate of 2.0% set by the Bank of England. However, progress has been made as the rate is now 2.3% down from the last report of 3.2%. This brings hope to consumers the economy is moving in the right direction and their budgets will soon find relief as the inflation drop trickles down to the consumer level. The decline in the inflation rate also brings hope of lower interest rates for borrowers.

Mortgage rates have remained elevated, but the cuts to lender rates in the first quarter due to a competitive market brought about by declining inflation optimism helped fuel buyer demand. The lower rates, some below the Bank of England’s standard base interest rate of 5.25%, motivated hopeful home buyers to return to the housing market. Even as optimism dimmed for a springtime cut to the base rate and lender rates began to rise, buyers were not deterred. The surprise result in the second quarter of this year is the average house price hit a new record high of £375,131.

In the first quarter of the year, lenders became competitive and began to lower their rate offers as optimism grew for a spring cut by the Bank of England’s Monetary Policy Committee (MPC). There were many mortgage and remortgage products that were cut to below the standard base interest rate of 5.25%. As inflation failed to hit the low levels expected, it became less likely the MPC would be cutting the rate in spring, and forecasts were postponed till summer and possibly August. The lowest rates began to be pulled and replaced with higher offers. 

If you are a home seller, it is going to be easier to find a buyer if you put a starter home on the market. First time home buyers are choosing from smaller properties, even ones in need of care or upgrades and improvements. Higher priced and larger homes are going to stay on the market longer because homeowners are not moving home as they had before, preferring instead to stay put rather than upgrade to a more expensive property while interest rates are more costly. According to recent data from Halifax, first time buyers are in search of smaller properties than they were when the pandemic lifestyle was the main driver of home buying.