Housing and mortgage update

This month's housing and mortgage update...

The Bank of England (BoE) kept Bank Rate at 5.25% following the latest meeting of the Monetary Policy Committee (MPC) in February. 

Bank Rate unchanged

Having risen to 5.25% in August 2023, the MPC voted to freeze Bank Rate for a fourth consecutive meeting in February, with a majority of six to three keeping it at its highest point since 2009.

Although a majority voted for no change, there was nevertheless a split in the result. Two committee members opted to increase Bank Rate by 0.25 percentage points, while one preferred a 0.25 percentage point decrease.

Many analysts do not expect rates to be cut until later in the year. Bank of England Governor Andrew Bailey previously said that Bank Rate will likely remain at its current level for the “foreseeable future”. The next Bank Rate decision is due on 21 March 2024.

Mortgage rates 

Mortgage rates remain much higher than they were two or five years ago, but lower than last summer. According to Moneyfacts, the average rate for a five-year fixed rate mortgage at the end of February was 5.32%. For a two-year fix, the average rate was 5.74%. This compares to peaks of 6.17% and 6.66% respectively in July 2023.

There’s no doubt that anyone remortgaging now is likely to experience a hefty increase in repayments following a decade of ultra-low rates.

Lower inflation could be a boost 

The latest official figures show that inflation, as measured by the Consumer Prices Index (CPI), rose by 4.0% in the 12 months to January, slightly below the BoE’s expectations. 

For now, the BoE is predicting that inflation will temporarily fall to its target of 2% in the second quarter of 2024 before increasing later in the year. If this turns out to be right, rate cuts could be in order in the short term, which could improve affordability for mortgage borrowers.

Housing market stronger in 2024

In 2023, higher mortgage rates resulted in fewer property purchases and less mortgage lending. The housing market is now expected to stage a recovery in 2024, analysts predict.

Indeed, the new year started with strong house price growth of 1.3% in January, according to Halifax, a fourth consecutive monthly rise.

However, cost-of-living concerns mean that many potential homebuyers’ finances remain squeezed. Ahead of the Spring Budget, three of Britain’s biggest housebuilders called on Chancellor Jeremy Hunt to cut Stamp Duty to boost the housing market. We’ll keep you posted on any announcements from the Budget.

Here to help

Rising, falling, or staying the same, there is a lot happening in the housing and mortgage markets. We’re here to help you make sense of what it all means for you.

Your home may be repossessed if you do not keep up repayments on your mortgage