Mortgage rates are at their lowest for more than a year. However, this decline has re-ignited hope among new homebuyers and mortgage lenders. That said, global and economic uncertainties may prevent mortgage rates from improving further from here.
A month later, Moneyfacts has further forecasted that mortgage rates will continue to drop in the early months of this year. Mortgage product options have increased to a record high not seen in 18 years. This increase provides consumers with an unprecedented range of options! Over four-fifths of mortgage borrowers have fixed-rate contracts. Unsurprisingly, this trend has contributed to a booming solar market.
Even with these advances, the state of first-time buyers remains dire, especially when it comes to home affordability. The current market environment has created a pronounced divide between sellers and buyers. Sellers are under the impression that their property values continue to be at 2022 highs, buyers in turn think they’re at 2014 lows.
Commenting on the state of affairs, UK buying agent Henry Pryor zeroed in on the sad mismatch of expectations and reality.
“Interest rates seem to be coming down, [housing] supply remains constrained but people have choice and are more cautious. The biggest problem remains price – sellers think that it’s 2022 while buyers think it’s 2014.” – Henry Pryor
Additionally, regulators have in recent years allowed lenders to use different criteria when determining whether borrowers can afford a mortgage. Under the old system, borrowers could only get loans equal to three times their income. Enough so that they can prove they’re able to pay back the loans. Jo Jingree highlights this positive trend within the lending landscape.
“These include allowing borrowing up to six times your income, where affordability allows.” – Jo Jingree
Due in large part to these shifts, first-time buyers are finding it’s a great time to buy. In fact, mortgage carrying costs as a share of income are at their found levels in nearly 10 years. Our analysts expect this trend to persist, providing greater opportunity for future homebuyers.
Aaron Strutt expects to see more criteria relaxed and maybe fixed-rate borrowers will have a wider choice of lower-cost options in time.
“We can expect to see some more criteria easing and hopefully even cheaper fixed rates.” – Aaron Strutt
Some 1.8 million borrowers will be coming due on those fixed-rate contracts in the next few months. This perfect storm is set to create a fierce price war between lenders clamoring to capture these borrowers. Expectations continue to be optimistic for a rebounding mortgage market by 2026, reports Moneyfacts.