What will the final months of 2023 have in store for potential and current homeowners?
Here, our friends at the Mortgage Advice Bureau (MAB) give us their thoughts on what the rest of the year will bring.
Good news for perspective homeowners?
Jeremy Hunt is due to present this year's Autumn Statement on 22 November, with suggestions surfacing that it may include some elements of much needed first-time buyer support. With high rental and living costs limiting deposit savings, high house prices meaning larger deposits are needed, and higher interest rates making it difficult to qualify for a big enough mortgage, first-time buyers haven't had it easy over the past 18 months.
Many people will, therefore, be looking to the government to support those hoping to buy their first home. There's been some speculation over what measures could potentially be introduced, with improvements to the LISA scheme and an extension of the mortgage guarantee scheme both suggested as potentials. The LISA is an ISA that can be used by under 40s to save for either their first home, or retirement - with the government topping up personal savings by up to 25%. However, current limitations mean they can only be used to purchase properties up to the value of £450,000.
It's also been suggested that an additional ISA product aimed at homeowners may be introduced. This could be in place of the help-to-buy scheme, which is no longer available outside of Wales - however, the details of any definitive schemes are not currently available.
There have also been hints that the mortgage guarantee scheme, which was introduced at the height of the pandemic, could be extended. This scheme was developed to encourage lenders to return to 95% mortgage lending, at a time where the level of employment uncertainty was high - with the government offering to cover a percentage of losses lenders might make.
However, with the majority of lenders now offering a range of 95% mortgages outside of the scheme, it's unclear how much assistance this would realistically provide to prospective homeowners.
Lenders Prepare Ground For 2024
More lenders are cutting the cost of borrowing in the wake of last week’s decision by the Bank of England to freeze the Bank Rate at 5.25% for the second time in a row.
Many lenders were quick out of the traps, announcing reductions across their fixed-rate mortgage deals for new and existing customers.
James King, Managing Director of broker MAB Kent, says the Bank Rate freeze is good news for mortgage holders, introducing more stability into the market. He expects it will lead to more reductions to fixed mortgage rates, although he predicts cuts will be gradual rather than abrupt: “With 2024 approaching, lenders will want to start the year strong and will want to enter the new year with a good pipeline of business.
“Those likely to benefit the most will be borrowing at lower loan to values [with larger deposits relative to the purchase price] as lenders will still be keeping a keen eye on risk.”