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What’s happening with Mortgages and House Prices?


Raymond Milne, Operations Director at Melville Independent Plc and Chartered ALIBF asks our top Mortgage Advisers, Bernie Hughes and Alistair Marsh; what is happening right now in the mortgage market?

Bernie reports that the Bank of England interest rate could be heading higher than 5% which could mean mortgage rates hitting over 8% in the Spring. He goes on to say that there are over 2 million mortgage borrowers in the UK that are on variable rate mortgages, and they are affected as soon as rates move whilst those with Fixed Rate mortgages will notice a steep rise in their monthly repayment costs when they try to renew their terms.

A typical mortgage of around £150,000 could see the monthly payments increase by over £200 if the mortgage rate went up from 2.5% to 5.0% per annum and Bernie suggests that those on fixed rates should be preparing for that likely increase well before their fixed rate ends.

Ali Marsh notes that several lenders, including the Halifax and Virgin Money, have been withdrawing some of their most popular deals. He reflects that he has spoken with several mortgage customers who wished to express their worry that their ability to buy a property or even just remortgage at the end of their fixed rate will be difficult. Although there are still plenty of lenders looking to take on new customers, the best deals are more difficult to find, and many people see the advantage of having access to someone who has tools to search this shrinking market for them.

Ali expresses that clients should not put this ‘on the back burner’ and hope that rates come down quickly. Being prepared and planning ahead are the watch words for the next couple of years as the mortgage market contracts.

My own view is that this extra pressure on borrowers with increased interest rates, along with the rise in inflation felt throughout the Scottish economy will dampen down house prices. With the Scottish government unlikely to pass on the recently announced income tax reductions, this compounds the problem. There is even the possibility of house prices falling in Scotland. Sadly, this is unlikely to benefit the first-time buyers or those aspiring to bigger homes because the borrowing criteria of lenders will become necessarily tighter and tighter.

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September 2022

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