Rupert Jones
House owners or prospective buyers are set to face higher borrowing costs, as mortgage rates continue to climb
UK lenders have been raising rates and pulling mortgage deals for the last couple of weeks, in a volatile and turbulent mortgage market, amid growing concerns over future interest rate rises.
Halifax Intermediaries has told brokers that it is upping fixed rates today, which are expected to increase by 0.82 percentage points.
Meanwhile TSB has said it is hiking rates by up to 0.75%.
The latest increases come just days after almost 800 residential and buy-to-let mortgage deals were pulled by UK banks and building societies.
Reactions to the news from Halifax that UK house prices experienced their first annual fall in 11 years are coming in
Tom Bill, head of UK residential research at estate agent Knight Frank, said:
This is unlikely to be the last national house price index to fall into negative territory this year. Mortgage rates will keep edging up as wage growth keeps core inflation stubbornly high and we expect prices to fall by around 5% this year.
However, Bill doesn’t believe that today’s figures mark UK house prices “falling off a cliff”.
He added:
This isn’t the global financial crisis part two for house prices and any decline will be kept in check by rising wages, low unemployment, cash sales, record-high levels of housing equity, longer mortgages and savings amassed during the pandemic. The UK housing market is coming back down to earth after a strong three years, not falling off a cliff.
Jeremy Leaf, an estate agent based in north London, and a former RICS residential chairman, said:
Halifax, like the Nationwide figures, exclude cash sales and reflect activity from a few months ago. However, they do confirm recent trends that tentative market recovery is being threatened by the prospect of more interest rate rises and stubbornly high inflation.
Leaf added that Halifax’s market survey shows that “prices are still considerably above where they were two years ago so cash and equity-rich buyers in particular are recognising the opportunities.”
Despite the recent slide in house prices, they are still £25,000 above the level seen two years ago, according to Sarah Coles, head of personal finance at broker Hargreaves Lansdown.
Unfortunately for sellers, this reflects the weakness that had crept into the market before the impact of higher rates had been passed onto Halifax customers – which is happening today. It means the pain is unlikely to be over yet.
Coles also cautions that the market now expects interest rates to stay higher for longer, pushing up fixed rate mortgage prices.
This is far from over. … Today Halifax will push up rates on its two-and five-year fixed rate deals, which is likely to depress prices even further in the coming months.
Introduction:
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Kicking things off this Wednesday is the latest house price index from Halifax, and it adds to the gloomier picture building around the UK housing market.
UK house prices posted their first annual drop since December 2012, the building society found, as the average property price fell by 1% last month, compared with May last year. This is despite average house prices remaining flat in May, following a 0.4% decline in April.
This takes the cost of a typical UK home to £286,532, slightly below the £286,662 seen in April.
However, not all homes are viewed equally, and detached properties are continuing to post modest house price growth.
The latest figures from Halifax chime in with last week’s figures from Nationwide building society, which found that house prices fell at an annual rate of 3.4% in May, representing the sharpest fall since July 2009, when the British economy was grappling with the fallout from the 2008 financial crisis.
It comes amid signs that the UK housing market is showing growing signs of stress, amid rising interest and mortgage rates.
Mortgage lending collapsed to the lowest collapsing to the lowest monthly level on record, and property valuations falling at the fastest annual rate in almost 14 years.
Figures from the Bank of England last week showed mortgage lending collapsed to the lowest monthly level on record, amid property valuations falling at the fastest annual rate in almost 14 years.
More news about the state of the UK’s housing market is also due out later today.
Record numbers of first-time buyers are taking out lengthy loans of around 30 years, in a bid to make their monthly payments more manageable, data from trade body UK Finance is expected to show when it is released later on.
Just under a fifth (19%) of all loans taken out by first-time buyers in March were for 35 years or longer, while more than half took a loan of over 30 years.
The data is expected to show that this is the highest proportion since records began in 2005, and more than double the 9% rate in December 2021, when the Bank of England started raising interest rates from a low of 0.1%.
The move is seen as an attempt by stretched house buyers to spread out the cost over a longer period, however it means that over the lifetime of a mortgage they will pay significantly more interest and could be burdened with debt into their retirement.
Away from the housing market, a criminal cyber gang – which is linked to Russia – appears to have issued an ultimatum to victims of a hack which affected companies including British Airways, Boots and the BBC.
The organisations are investigating the potential theft of personal details of staff after the hack, which targeted software called MOVEit used by Zellis, a payroll provider.
The Clop group posted a notice on the dark web, which cautioned those hit by the MOVEit hack to email them before 14 June – otherwise it threatened to publish the stolen data.
Staff at BA have reportedly been informed that compromised payroll data included names, addresses, national insurance numbers and banking details.
The BBC has confirmed that it has also been affected, but the broadcaster has said it does not believe that the breach includes staff bank details.
A blog post, written in poor English, has been seen by the BBC. It reported that the posts reads: “This is announcement to educate companies who use Progress MOVEit product that chance is that we download a lot of your data as part of exceptional exploit.”
The post then calls on affected organisations to email the gang to begin negotiations.
Employers have been urged not to pay any kind of ransom demanded by the hackers.
The agenda
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0700 BST: Halifax UK house price index
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0800 BST: OECD releases its economic outlook
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14.15 BST: Hearing of UK parliament’s Treasury Committee with insurers, discussing excess profits, competitiveness within the industry, and the regulatory environment
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UK Finance household finance review for Q1
