January 2024 Newsletter
Happy New Year!
it's been a wild ride in 2023, although the economy is not out of the woods quite yet, predictions are looking far more positive than previously expected at this stage, we should all be comfortably hopeful for a better year in 2024.
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As I'm sure we are all aware at this stage, the reason for soaring interest rates in 2023 has been a stubborn inflation rate which was 10.1% at this time last year.
The main, or in fact, the only tool in the Bank of England arsenal to combat this was to increase the cost of borrowing and reduce spending. They did this by increasing the Bank of England Base Rate.
After hefty increases in the base rate across 2023 and reductions in fuel and energy prices during the latter part of 2023, inflation dropped to 3.9% in November 2023, it's lowest level in two years.
This is incredible news and has altered analysts predictions for the coming year, with Price Waterhouse Cooper predicting that we will come close to hitting the Bank of England target inflation rate of 2% during 2024.
Even with these challenges around inflation and a Bank of England base rate set at 5.25%, it's highest level in 15 years. I've noticed that the first time buyer market has been healthy with many purchasers taking advantage of increased buying power and property price reductions.
The main challenge has really been for the buy to let market where mortgage stress testing at a higher interest rate has impacted affordability and lowered profitability for landlords.
It has also hugely impacted homeowners who have been faced with far higher monthly mortgage payments on their remortgages and unattractive rates for additional lending when considering moving property.
Thankfully with the market settling and with positive movement in the inflation rate, in part thanks to the above challenges, we're now seeing lenders bring down their interest rates to reflect this more positive outlook.
I have included a couple of purchase examples detailing the change in interest rate from September to now.
Mortgage Rates Today
1 Lincoln Road - 1 Bed Flat
£235,000
Deposit: £35,250 (15%)
Mortgage Required: £199,750
In September 2023 a 2-Year Fixed Rate for this level of lending would have been 5.97%*
On a 35-year term that would make the monthly payment: £1,134
As of January 10th 2024, under the same terms the interest rate would be 4.35% with Coop Bank
This would give a payment of £926.86
So since September the payment for a purchase of this level has reduced by £128 per month or £4,971.36 across the initial 2-year term
*rates in September were sourced from the whole of market. This interest rate is meant to give an indication of a general rate available at that time and isn't linked to a specific lender.
Middle Street - 3-bed Semi-Detached House
£500,000
Deposit: £125,000 (25%)
Mortgage Required: £375,000
In September 2023 a 2-Year Fixed Rate for this level of lending would have been 5.76%*
On a 35-year term that would make the monthly payment: £2,078
As of January 10th 2024, under the same terms the interest rate would be 4.18% with Barclays
This would give a payment of £1,701.13
So since September the payment for a purchase of this level has reduced by £376.87 per month or £9,044.88 across the initial 2-year term.
*rates in September were sourced from the whole of market. This interest rate is meant to give an indication of a general rate available at that time and isn't linked to a specific lender.
With this slight reduction in rates, I've already seen improvements to the Buy to Let mortgage options and the profitability available. As for remortgaging, the rate has made a difference, but not nearly enough as yet.
There is currently no aggressive bounce back or dramatic drop in interest rate expected for 2024. However, as inflation continues to improve, and lenders reduce their fixed rates in line with market predictions, it looks as though 2024 could be a far more promising year than previously expected.
Jen Boulter