The UK housing market is witnessing a subtle shift in mortgage rates, according to recent data. The average five-year fixed mortgage rate has seen a slight increase to 4.72%, up from 4.62% just a year ago.
Similarly, the average two-year fixed mortgage rate has climbed to 5.08%, marking an increase from the previous year’s 4.95%. The average 85% Loan-to-Value (LTV) five-year fixed mortgage rate has dipped slightly to 4.67%, from 4.68% a year prior, and the average 60% LTV five-year fixed mortgage rate has decreased to 4.19%, down from 4.23%.
For first-time buyers, the average monthly mortgage payment on a typical property for this demographic, assuming an average five-year fixed, 85% LTV mortgage, now stands at £1,081 per month. This figure is slightly higher than last year’s £1,074, indicating a marginal increase in the financial burden on new entrants to the housing market.
Amid these financial shifts, Propertymark has called on the government to maintain its commitment to building 300,000 new homes annually in England. This appeal comes in response to the latest demographic changes highlighted by the Office for National Statistics’ (ONS) divorce rate figures. The ONS’s recent publication shows a noteworthy decrease in divorce rates, the lowest since 1971, with 80,057 divorces recorded in 2022. This decline is contrasted sharply with the pre-pandemic figures of 2019, which saw 108,421 divorces of both opposite-sex and same-sex couples.
Legal experts interpret the reduced divorce rate as an indication that many couples may be postponing separation due to the escalating cost of living pressures. Nathan Emerson, CEO at Propertymark, said:
“These figures demonstrate that there should be an even further increase in demand for housing in the near future once more people feel they can afford to divorce, should they need to. Other factors that will affect an increase in demand for housing include the number of separated families gradually increasing, people living longer, and more people relocating to this country. It is imperative that the UK Government builds more houses and meets its own target to ensure that they can keep up with demand in response to the country’s changing demographics.”
What’s more, reports have emerged, initially from the Financial Times, that Chancellor Jeremy Hunt is drafting a proposal for a 99% mortgage scheme, expected to be unveiled during the Spring Budget. This scheme, which first sparked speculation in January, proposes allowing prospective homeowners to purchase property with just a one percent down payment, with government backing for the remainder of the loan. While there has been a call from industry experts for measures to assist buyers, such as reviving the Help to Buy program or offering a stamp duty discount, opinions on the potential impact of a 99% mortgage are divided. Daniel Austin, CEO and co-founder at ASK Partners, said:
“This is positive news for the housing market as it will serve to reinvigorate the first time buyer market, consequently driving more turn over of properties higher up the chain. With rental prices so high, it can be hard to save for a meaningful deposit but those managing the rents would find it easier to make monthly mortgage payments.
This will be very welcome news for a generation of renters with no access to bank of mum and dad, who might now have a chance of home ownership, and for developers who we saw benefit from the previous Help to Buy scheme. For the property sector overall, the fact that both parties are prioritising high profile housing policies in the run up to the election is encouraging, as is any financial stimulus to the sector as long as it doesn’t create too much froth in the market.”