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Interactive Diagnostic

In our quest to provide you with the most valuable market insights, we spoke to Chris Hewitt, a seasoned expert from CAPC Mortgages. Chris has his finger on the pulse of the mortgage market and shares his expertise on the current landscape for residential mortgage interest rates, house prices, commercial lending, and the Buy-to-Let (BTL) market. Here, we summarise the key points to keep you informed and up-to-date.

Residential Mortgages Interest Rates:

In the past 15 months, the Bank of England has adjusted its base rate 14 times. The latest meeting held rates steady, offering a brief respite. Yet, uncertainties like global food and energy prices remain beyond the Bank’s control, potentially causing inflation spikes. Although average 5-year fixed-rate mortgages recently dropped to around 5.6%, actual mortgage costs depend on various factors, including how lenders fund their books.

We anticipate no significant interest rate drops in the next six months. Autumn often brings slight rate reductions, driven by lender reviews. In conclusion, residential mortgage rates will likely hover between 4.8% and 6% unless global conditions change significantly.

Residential House Prices:

While average UK house prices have dipped in the last three months, these fluctuations vary by location and are unsurprising given the substantial price hikes over the past few years. The average UK house price remains roughly £40,000 higher than pre-pandemic levels.

The 2023 UK housing market isn’t highly leveraged, unlike the 2008 crisis. Expect a slowdown in sales and more realistic expectations from sellers and buyers. Average house price growth should stabilise over the next six months.

Commercial Mortgages:

Commercial lending depends on various factors, including loan type, sector, and the UK’s economic outlook. Banks are tightening criteria and reducing Loan to Values (LTVs). While some lenders claim to offer up to 75% LTV, many are closer to 60-65%.

Different lenders have different appetites, which can change rapidly. Sectors like hospitality, retail, and property development face headwinds, while warehouses and healthcare lending are favoured. Interest rates range from 7.5% to 11%, depending on factors like sector, LTV, and trading data.

Expect commercial mortgage funding to be more challenging in the next 12-24 months due to a slowing UK economy. If you’re considering commercial borrowing, exploring options now is advisable.

Buy-to-Let (BTL) Market:

Landlords have faced government interventions, such as increased taxes and property standards. While higher standards are welcome, they add financial strain, especially with recent changes in EPC requirements. Many small landlords plan to exit the market within the next five years.

These factors, combined with higher mortgage rates and lender stress tests, have increased rents by as much as 15% in some areas. This trend is likely to continue as landlords adjust to new financial realities.

We expect another year of rent increases before the market stabilises. Smaller landlords may continue to leave, but increased rents should help rebalance the BTL market in the next 12-24 months.

Conclusion:

In this brief market commentary, we’ve covered the latest developments in residential mortgage rates, house prices, commercial lending, and the BTL market. Stay informed and consider these insights when making financial decisions in the coming months.

By working with mortgage brokers like CAPC Mortgages, Grenfell James can support you to revolutionise your business finances. Connect with Chris Hewitt on LinkedIn or call 07766 816860 for a no-obligation chat – tell him we sent you!