There have been a lot of changes in the mortgage market this year. It’s been unusual to say the least, so, can we expect more stability in the coming months.
What are the likely changes to the mortgage market?
Actually, I should probably start by mentioning that the title of this piece is a little bit misleading. Not because things aren’t looking upbeat, they are, but that word ‘improve’ can be taken to mean things were bad. That isn’t what I am saying. The mortgage market may been volatile recently, but just for perspective, it has been much worse in the past. Rates have been higher and the available deals less favourable on many occasions in fairly recent history. The truth is that we have seen some less favourable situations perhaps, but it has hardly been the mortgage apocalypse.
We have been experiencing unusually low rates and unusually high housing for many years. As a result, we are perhaps seeing things a little darker than they really are. That said, you cannot deny the instability has been a bit of a roller coaster for buyers.
So, what can we expect from the mortgage world in the coming months? Well, probably more changes as the lenders adjust to the new situation but that could mean some good news for borrowers. Here are 5 things that could be really positive in the short term.
- House prices have been reduced.
After years of accelerated growth, the housing market is slowing its meteoric growth and price increases. That means a more stable marketplace and puts the buyer back in the driving seat a little. Consistent pricing means no more moving of the goal posts for your mortgage application and in many parts of the country, housing is a lot more affordable than it has been in recent years.
- Inflation is expected to slow down.
Unless you have been seriously off-grid, you will know that inflation has been the main cause of the rise in interest rates. The Bank of England (BoE) has raised rates in response to spiralling inflation and the higher the base rate, the higher the mortgage rate tends to be. Just a few days before writing this article, Governor of the BoE, Andrew Baily said that he expected inflation to ‘drop quite markedly’ this year. That should call into question any need for further interest rate rises or a least any dramatic ones. The steadier the BoE rate, the more favourably the mortgage providers will see new deals.
- New, innovative, products.
The mortgage lenders sometimes get a bit of a reputation for being stuck in their ways. This is far from the truth. They are commercial organisations in a competitive market, and, like any good business, they will respond positively where they can. As inflation and interest rates start to settle, we can expect the mortgage companies to look at their offering and we should see some exciting developments.
- Houses are still in demand.
Again, it’s important to get some perspective on what lower house prices mean. When you are talking about something that is worth 100s of thousands of pounds, which has also always increased in value and is a basic aspiration for our society, the slowdown in price rises clearly doesn’t mean it’s suddenly not attractive to own a house. Investing in property is still going to be a great option for your money now and in the future.
- The mortgage industry is responding to the market.
Lenders and industry players are adopting a more holistic approach and considering factors beyond just the traditional numbers. The industry has paid attention to the oddities of the system, (for example, some applicants being unable to demonstrate financial suitability despite showing consistently higher rent payments) and responded. They are now starting to take a more holistic and more flexible approach. This is likely to continue and will result in a greater understanding of individual circumstances, making the dream of homeownership more attainable for many.
As always, there is no guarantee of what the market will do and the unexpected does happen. That said, things are looking good for the customer right now. Even better, they look set to continue to improve in the short term.
With so much happening, now is a great time to call us and have a chat about how we can help you find the right mortgage product.