Housing Market Showing Home Buyers Exiting When Homeowners Need Them to Stay

Housing Market Showing Home Buyers Exiting When Homeowners Need Them to Stay

As data reports are being released, it is becoming more evident that what experts predicted could be materializing. The housing market is becoming different. It is leaving behind the era where buyers showed up no matter what. The resilience is breaking down. Caution is setting in and affordability is an issue as interest rates rise. The housing market is losing buyers, and homeowners don’t need that to happen, especially now.

When the housing market loses buyers, home values decline. It could mean new home buyers, those that have purchased in the last few years, might be headed toward negative equity. It happens when the property value falls below the debt of the property. With negative equity, the homeowner is vulnerable. Remortgaging, which could save money, and offer security from rising interest rates, is out of reach.

The opportunity to remortgage is important when interest rates are rising. Without the ability to get an interest rate that is affordable and avoid rising rates, the homeowner is at the mercy of rising costs. It is paying more than necessary. 

At the end of a homeowner’s mortgage term, the homeowner could remortgage or the lender will move them to their standard variable rate (SVR). Currently a SVR is risky. The homeowner will be impacted by each interest rate hike that occurs. The lender could also choose to increase the SVR due to issues beyond the Bank of England’s decision to raise rates. 

Rather than be moved to a SVR, a homeowner could remortgage. A remortgage usually offers the homeowner lower interest rate levels than a SVR. When rates are extremely low, as they had been, an SVR could be acceptable. If rates are falling, a SVR could put the homeowner into experiencing falling rates and saving money. It isn’t the case now.

Rates are rising. Last December, the Bank’s standard base interest rate was 0.1%. Almost zero. Now the base rate is 3.0% after having gone through increases at each of the last eight consecutive meetings of the Bank of England’s Monetary Policy Committee (MPC). The last meeting, which was earlier this month, resulted in the largest increase in decades. 

The next MPC meeting is the first week of December. Another rate hike is coming. In fact, while the base rate is currently 3.0%, some experts believe it will have to rise to 5.0% or higher to get inflation under control and begin a decent to the Bank’s target of 2.0%. Inflation is over 13%. 

Meanwhile, the housing market reports are showing signs of exiting home buyers. Halifax reported UK house prices have fallen by 0.4% according to October data. The average house price fell for the third time in four months to £292,598. House price annual growth declined to 8.3% in October, down from September’s 9.8%.

Other reports have shown deeper declines in the housing market, such as Nationwide’s report of a 0.9% decline in house prices for October. 

Experts have forecasted price declines of up to 10% in some areas of the UK.

Homeowners should know buyers exiting the market has an impact on the UK economy and it can hit personally very hard in some cases, such as could be the case for those in danger of facing negative equity.

Remortgaging could offer a lower interest rate, and with a fixed rate choice the rate is locked in and offers relief from increases. It is so popular to remortgage for savings and security that some homeowners are taking on penalty fees to end their mortgage term early to allow for early remortgaging at current rates rather than later when their term would have ended.

It is easy to determine if a remortgage would be helpful. Shopping for a remortgage deal is quick and simple to do online. Visiting the website of a lender could offer a quote to review in a matter of minutes. Going website to website will put several quotes in hand to compare. A homeowner could also visit a remortgage broker site and in a one-stop shopping experience get quotes from various lenders to compare and find the best remortgage offer. Brokers could have exclusive deals not found directly from lenders.

Interest rates are on the rise. Inflation is here to stay for a bit. Rather than pay more as interest rates rise, which they will, it could be a smart strategy to shop for a remortgage deal and do so sooner rather than later. 

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