The Bank of England have held the UK base rate at 3.75% for the fifth consecutive time, but the cost of mortgage borrowing is currently considerably higher. As of today, 30th July the average two-year fixed rate deal is 5.62% and a five-year deal is 5.66%. Earlier this year, mortgage deals were more competitive with lower rates, well under 5%, despite the Bank of England rate remaining unchanged.
The conflict in Iran has pushed the cost of oil up, subsequently pushing up energy costs and putting pressure on inflation; hence the mortgage lenders are bracing themselves for an eventual a higher Bank of England base rate.
The impact of this is that first time buyers are short in numbers as affordability has become more difficult. Many first-time buyers are waiting for the rates to become lower, which is unlikely until there is a solution to the conflict in the Middle East, whilst others are buying but only if the property price is attractive enough. As the cost of borrowing has become more expensive the more buyers want to negotiate on the property price.
Many homeowners are finding the sale of their property very difficult and price reductions are commonplace. A large number of sellers are withdrawing their properties from the market completely and giving up on the idea of moving altogether rather than reducing. It feels like a large percentage of properties currently offered for sale simply won’t sell at the current asking price.
Lower property prices are a good opportunity for buyers who are wanting to move now with many taking the view they may pay a bit more for the mortgage for a couple of years, but the lower priced property works out to be a better overall deal.