According to a recent report from Nationwide, the UK housing market is doing well despite continued high interest rates. Home buyers are paying attention to the market and the average house price has grown by 0.4%. The April average of £261,962 grew to £264,249 in May with home buyers choosing to move ahead in their purchases without waiting for the expected cut to the standard base interest rate by the Bank of England’s Monetary Policy Committee (MPC). 

Homeowners could be throwing away money. In the hopes of waiting out for lower interest rate offers in remortgaging, they have bypassed securing a new deal and allowed their lender to move them to their standard variable rate (SVR). Waiting for lower rates could be costing their household budget dearly. According to a recent report, almost a third of homeowners have taken on a SVR. Some may have forgotten to remortgage, or avoid it for they felt it would be hard and stressful, while others are holding out for lower rates before they remortgage. The report revealed they are likely spending an average of £278 a month unnecessarily.

The largest hurdle to homeownership is buying in today’s market and it has not been harder to climb the property ladder than it is now. Interest rates are high, despite having declined recently as lenders become more competitive. Asking prices have continued to climb on top of the pandemic lifestyle buying frenzy and supply in the housing market is low. Coming off an inflation stress that reached double digits has made it difficult to save for a deposit.

Many homeowners are coming to the end of their mortgage term this year, or they already have done so. Those that secured a two-year fixed deal in 2022 are likely to experience financial pain at the difference in the cost of borrowing then and now. For at the expiration of their mortgage term their current interest rate will end, and they will either remortgage or their lender will move them to their standard variable rate (SVR). Avoiding a SVR is encouraged by experts because the interest rate will likely be much higher, and more expensive with an SVR than with a remortgage.

Inflation, which had lingered in double digits last year, has now dropped to the lowest level in almost three years. Disappointment has been expressed at the fact that the inflation rate failed to reach the forecast of 2.1%, which would have put it only slightly above the target rate of 2.0% set by the Bank of England. However, progress has been made as the rate is now 2.3% down from the last report of 3.2%. This brings hope to consumers the economy is moving in the right direction and their budgets will soon find relief as the inflation drop trickles down to the consumer level. The decline in the inflation rate also brings hope of lower interest rates for borrowers.

Mortgage rates have remained elevated, but the cuts to lender rates in the first quarter due to a competitive market brought about by declining inflation optimism helped fuel buyer demand. The lower rates, some below the Bank of England’s standard base interest rate of 5.25%, motivated hopeful home buyers to return to the housing market. Even as optimism dimmed for a springtime cut to the base rate and lender rates began to rise, buyers were not deterred. The surprise result in the second quarter of this year is the average house price hit a new record high of £375,131.