Low mortgage rates continuing to drive property market

Latest Bank of England reports show that mortgage and savings rates remain at rock bottom, with some savings rates at record lows.

The Bank of England has reported that average savings rates have dropped to below 0.1% with August’s figures reporting lows of just 0.09%. New fixed rate accounts are showing averages of just 0.29%.

Savings levels have increased to £9.1 billion which is up from an average of £8.5 billion between April and June this year, and above the pre-pandemic average for the year of £4.7 billion. But levels still remain well below the peak of £27.5 billion last May.

Figures also show that low mortgage rates continue to drive the property market. The average rate on new mortgages fell 1 basis point to 1.82% in August, just below the average since the onset of the pandemic, while the rate across all mortgages stuck at a record low of 2.05%.

Commenting on the figures, Sarah Coles, personal finance analyst at Hargreaves Lansdown said:

“August ushered in more pain for savers, as the average easy access rate fell to a new and even more miserable low of 0.09%. Most of us are making next to nothing in miserable high street accounts, and in such a dismal savings landscape, we can’t see the point of switching.”

“Rock bottom mortgage rates are underpinning the property market, because while prices have risen out of sight, cheaper mortgages have kept monthly costs firmly on the ground. There are some phenomenal deals available, and a real opportunity for homeowners to cut their costs.”

“Low rates, coupled with the ongoing race for space, means that while we’re expecting the market to cool slightly this autumn, we’re not expecting it to get uncomfortably chilly. One positive sign is that mortgage approvals for home purchases (which is an indicator of future demand) were still higher than before the pandemic in August, although they fell very slightly to 74,500.”

Jonathan Sealey, CEO at specialist lender Hope Capital, commented:

“Of course, it was to be expected the level of borrowing would not compete with the record borrowing in June, which was undoubtedly owing to the opportunities created by the stamp duty holiday.”

“After the rush to meet the deadline, it was obvious we were going to see a more sustainable level of activity in the aftermath. However, moving forward, it is crucial the desire to buy properties does not flake.”

“Today’s Bank of England statistics also reveal that while mortgage approvals for house purchases were down on recent high levels, they were still 12% higher than pre-pandemic average, which is reassuring.”

“Ultimately, the availability of competitive rates, high LTV’s and innovative solutions, will undoubtedly be the driver in ensuring there are plenty of opportunities to be seized by borrowers, now we begin to approach the end of 2021.”

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