For the fifth consecutive time, the Bank of England’s Monetary Policy Committee (MPC) could increase the standard base interest rate. The meeting of the MPC is scheduled for 16 June. The expectation is that the vote will be for another increase of 0.25% and the new base rate will be 1.25%. However, there were members that would have liked for the last hike to be 0.50%, so there is always the possibility of a greater increase than 0.25%. Any increase will be a difficult one for those not prepared for higher loan repayments such as those holding mortgages.

Home buyers, once they have become homeowners, still have options after they choose their first mortgage deal. Once their term is expired, they have the choice to remortgage for a new deal or they can allow their lender to move their mortgage onto the lender’s standard variable rate (SVR). The SVR strategy, while an easy route to take since it requires little of the homeowner as there is no shopping to do, is considered risky. There are times when a SVR is a riskier choice than others and perhaps there has been no riskier time in over decades than right now. For if homeowners desire to not pay more than necessary, then a remortgage could be the only choice to save money.

The latest data from Nationwide Building Society has been released and it reveals that the UK housing market has kept interest from home buyers but could be slowing. House prices rose in May faster than they had in April with a 0.9% increase versus the 0.4% recorded for April. However, the annual rate declined slightly to 11.2% in May from the 12.1% recorded in April, which was attributed to lower house prices than the same time last year.

In April, UK mortgage approvals fell to the lowest level since June 2020 according to data released by the Bank of England. It could be the start of a slowdown according to experts. It could also be a natural correction following the boost that occurred after the first few interest rate hikes by the Bank’s Monetary Policy Committee (MPC). Those that had hoped to buy, but were waiting on the fence for one reason or another were motivated to shop and buy quickly to avoid having to pay more expensive interest rates. Of course, fewer approvals could also point to some home buyers being shut out of the market, particularly first time home buyers.

Homeowners are shopping for remortgages and there is a good reason that demand is so high for remortgage lending. The Bank of England’s Monetary Policy Committee (MPC) has been responding to the high rate of inflation by increasing the standard base interest rate. It has been raised in the last four consecutive MPC meetings. What was the lowest ever interest rate in the 300 plus year history of the Bank in December of last year of 0.1% has been increased to 1.0%. 

The housing market is still quite busy. The demand is strong as home buyers are still inquiring as to available properties through agents and online listing sites. Supply in the market is low, but competition for properties is evident when shopping for property. Activity in the market could be evidence that there are buyers seeking to secure their purchase before more interest rate hikes occur and borrowing becomes more expensive.