The UK housing market is starting to thaw with mortgage rates on the decline. Analysts expect this upward trajectory to make for a hot mortgage market. They’re to rates to drop even more in the months ahead, stoking even more activity. Moneyfacts’ statement emphasizes that the number of mortgage products available has jumped to its highest level in 18 years. This unprecedented surge provides borrowers greater opportunities and options than ever before.
Over the last few months, mortgage rates have been on a downward trend. Then in August 2022, the average two-year fixed mortgage rate fell below 5%. That was the lowest point it dropped to since last September. This rapid decline has created a sense of hope among borrowers and lenders alike. Over eight in ten mortgage borrowers now have fixed-rate contracts, which points to a new era of stability to the market.
Cost of living correspondent Kevin Peachey notes that the UK’s housing market has frozen over. It has pulled back from the “red-hot” housing market conditions that benefited sellers during the COVID-19 pandemic. Analysts think lenders will make more new home mortgages this year. This is probably true as more than 1.8 million borrowers approach the expiration of their fixed-rate deals, contributing to heightened competition.
Jo Jingree, director of broker Mortgage Confidence, indicated that regulators have allowed lenders to exercise greater flexibility regarding mortgage affordability. She stated, “These include allowing borrowing up to six times your income, where affordability allows.” Such a move would help promote activity in the market by opening the floodgates for more qualified buyers.
Aaron Strutt from broker Trinity Financial expects to see further relaxing of lending criteria. He said, “We can expect to see some more criteria easing and hopefully even cheaper fixed rates.” As lenders compete with one another for business, borrowers will have a better chance to receive more favorable terms on their loans.
Even with a brightening forecast for the mortgage space, significant challenges still linger. Additionally, the overall supply of properties that are available is still tight, causing buyers to proceed more cautiously. One observer remarked, “Interest rates seem to be coming down, [housing] supply remains constrained but people have choice and are more cautious. The largest issue is still price – sellers believe it’s 2022 and buyers believe it’s 2014.”
The broader market sentiment is one of optimism. Challenges do exist, but low costs and a rapid expansion in things like technology and product offerings offer an optimistic backdrop for continued growth.
There are high hopes for a dynamic new mortgage market in 2026. Moneyfacts affirmed, “Expectations are high for a booming market in 2026. Mortgage rates are lower year-on-year, and the choice of deals is abundant.”