- Market sees encouraging mortgage rate signs
- Nationwide reports slight home price increase
- Affordability challenges persist, inflation impacts
The Nationwide reports that “encouraging signs” indicating a decline in mortgage rates contributed to a 0.2% increase in home prices last month.
According to financial markets, interest rates have peaked and are starting to decline, alleviating affordability pressures, according to the building society.
However, its chief economist cautioned that anticipating a significant reduction in borrowing costs in the immediate future would be impractical.
Bank of England’s Interest Rates at 15-Year Peak
The Bank of England has set interest rates at a 15-year peak of 5.25%.
To mitigate the impact of inflation and curb the escalation of consumer prices, the Bank has implemented a base rate hike.
However, due to these increased mortgage rates, individuals can now not afford to purchase residences.
Despite prices increasing for the past three months, November property values were 2% lower than last year, according to Nationwide.
According to the lender, the average cost of a residence in the United Kingdom has increased to £258,557.
The building society’s data is derived from its mortgage lending activities; thus, it excludes individuals who acquire properties through buy-to-let transactions or cash purchases. According to the most recent official statistics, cash purchasers comprise over one-third of all housing transactions.
“Take a step towards financial freedom – claim your free Webull shares now!”
The average house price has remained approximately £40,000 higher since the height of the COVID-19 pandemic when prices skyrocketed due to increased demand from individuals working from home, who also took advantage of a stamp duty holiday and desired more space.
Robert Gardner, chief economist at Nationwide, remarked that the housing market was “performing marginally better than anticipated.”
There are some positive indications that mortgage rates have begun to decline, which will alleviate affordability concerns,” he said, adding that in recent times, financing costs had “substantially stifled the market.
He stated that financial markets believed interest rates had reached their apogee and would continue to decline in the coming years, thereby influencing mortgage-funding longer-term rates.
Although affordability is a concern, it is impractical to anticipate a substantial change in that regard. “No one anticipates a significant reduction in mortgage rates,” he further stated.
Mr Gardner stated that the labour market would avert a substantial decline in housing costs. Still, he acknowledged that it would require some time for income growth to surpass that of property price increases and affordability to improve.
On Friday, the mean interest rate for a two-year fixed mortgage was 6.04%, whereas the average rate for a five-year contract was 5.65%, as reported by Moneyfacts, a financial information service.
This week, the Bank of England released data indicating that the number of mortgages approved for homebuyers increased to 47,400 in October, up from 43,300 in September, the lowest level in eight months.
“The future brightens”
Senior economist at Pantheon Macroeconomics Gabriella Dickens predicted that the month-over-month increase in Nationwide’s financials would “likely reverse in the very near future.”
“A material recovery in house prices still looks a few months away yet,” she stated, nevertheless stating: “The outlook for next year, however, is brighter.”
Although the markets have priced interest rates at their apex, the Bank of England has consistently cautioned against any notions that rates will be reduced soon.
In the year leading up to October, inflation declined to 4.6%, but it still exceeds the Bank’s target of 2%.
Although the Bank has maintained interest rates at 5.25 per cent on two separate occasions, its governor, Andrew Bailey, has warned that rates will continue to be elevated for the foreseeable future.
