House market facing ‘winter of discontent’
THE housing market could suffer a “winter of discontent” as rising inflation looks set to drive up mortgage costs after years of rock bottom rates.
Yesterday’s figures showing unemployment falling and job vacancies hitting a record high could force the Bank of England to hike base rates sooner rather than later. That could end the low mortgage rate era so it may be worth fixing yours now before they rise.
Scott Taylor-Barr of Carl Summers Financial Services said the end of the stamp duty holiday and furlough, rising living costs, tax and National Insurance are all threatening the housing market outlook: “Add in the usual Christmas slowdown and we can expect the market to lose some of the wind from its sails.”
Benefit cuts and moves to make students pay back loans at a lower threshold may also hit growth, said Shaw Financial Services founder Lewis Shaw: “We have not seen the true impact of Covid or Brexit yet, and have all the ingredients for a winter of discontent.”
UK house prices rose 7.4 per cent in the year to September, latest figures from Halifax show. This added another £4,400 to the average property price, which is now a record £267,587.
Halifax said the post-pandemic “race for space” has driven growth, along with improving labour market prospects and low borrowing costs.
That may soon change with BoE policy maker Michael Saunders warning that base rates may rise due to higher prices.
Markets have already priced in the first rate increase in February, and have half-priced in a hike as early as December.
ThinkMarkets market analyst Fawad Razaqzada said inflation is proving to be hotter than the BoE expected and likely to persist longer. “If we see wages data catch up with inflation, then the BoE will have even less reason to keep current interest rate policy,” he added.
Miles Robinson, head of mortgages at online broker Trussle, said best-buy mortgage rates are still below 1 per cent and urged buyers to take advantage before they increase.
L&C Mortgages broker David Hollingworth said somebody with a £150,000 mortgage could save £2,500 a year by switching deals, and protect themselves from any hikes.
Santander currently offers a two-year fixed-rate remortgage charging 0.84 per cent to 60 per cent loan-to-value (LTV), with a £749 fee and free valuation and legal work. HSBC offers a fiveyear fix at 0.94 per cent, up to 60 per cent LTV with a £999 fee.
By contrast, Barclays and Nationwide charge 3.59 per cent on their standard variable rates (SVRs), while some charge more than 5 per cent. Hollingworth said: “The cost of doing nothing and staying with your mortgage lender is rising.”
L&C’s website allows homeowners to see how they could benefit from shopping around for a new mortgage. “With other living costs on the rise, it’s important that borrowers keep a tight grip on such a big part of their monthly budget,” he said.