Tuesday, 18 April 2023

Mark Crawford of mortgage advisers Crawford Mulholland Financial believes the housing market here is now shaking off the impact of last year’s disastrous mini-budget.

Although double-digit inflation is putting a strain on everyone’s monthly outgoings, there are some unexpected areas where costs are actually moving in the right direction.

There is no doubt that the chaos on the money markets which followed the Liz Truss and Kwasi Kwarteng mini-budget last October was a painful experience, particularly for those in the process of arranging a mortgage or re-mortgaging.

Economists will be picking through the causes and consequences of that particular calamity for decades to come, but for the mortgage market at least, business is returning to normal.

In a world where everything feels as if it is inexorably heading in an upward direction, the announcement by the Bank of England’s Monetary Policy Committee (MPC) last month that its base rate was rising by another quarter percentage to 4.25% looked like just more of the same. The effect on the mortgage market, however, was more complicated than the headline figures suggested.

While the rate rise was unwelcome news for those on tracker and variable mortgages who now have higher monthly mortgage payments as a consequence, the fixed rate mortgage market actually went in the opposite direction. Fixed rates fell on the back of the MPC’s announcement.

Just 20 minutes after the base rate increase was announced one of the UK’s largest mortgage lenders sent out an email to mortgage advisers to say that its residential fixed rate mortgages were being cut by up to 0.45%.

In the following week the top five UK lenders who account for 80% of all mortgages announced cuts in their fixed rates, with 0.47% being the largest reduction. That would save around £50 a month on a 25-year mortgage of £164,000, the average price of a first-time buyer home in Northern Ireland.

The reason fixed rates fell is that lenders had already priced the Bank of England increase into their fixed rate product offering. There were no surprises, hence the ability of some providers to announce rate cuts before the dust had even settled on the MPC’s decision.

Where mortgage rates go from here is more difficult to assess but on the whole the trend has been for cuts in fixed rates on a weekly basis since November 2022.

The mortgage market returning to normality is backed up by recent activity in the housing market.

All eyes will be on the next MPC meeting on May 11 but for the housing market, there are pointers towards renewed confidence.

While only the brave or the foolish would predict the future, there are signs of positivity, especially when considering Northern Ireland specific data.

According to the latest Nationwide survey, for instance, house prices in Northern Ireland rose by 1.3% over the past three months compared to a UK-wide fall of 2%, while a recent survey from PropertyPal suggests that Northern Ireland is one of the most affordable places to buy in the UK. The average house price to wage ratio in February 2022 was 5.6 in Northern Ireland compared to 8.9 in England, 6.8 in Wales and 5.5 in Scotland.

Every house buyer should carefully weigh up their own personal circumstances against their views on the fundamentals of the local property market.

There will always be pros and cons in that debate, but on the plus side, the ‘winter of discontent’ which last autumn’s mini-budget sparked in the money markets appears to have given way to a brighter spring.

Article as featured in the Belfast Telegraph 11.04.23