Mortgage trends and interest rates – what could happen in 2022?

Since the Bank of England raised the interest rate last week to 0.25% from an all-time low of 0.1%, industry commentary around 2022 mortgage trends continues to gather pace.  

Despite the emergence of the Omicron variant, which has caused concern in financial markets across the world, and the re-imposing of restrictions and travel bans, the Bank of England decided last Thursday to increase rates back up to 0.25% from record lows of 0.1%.

This latest interest rate rise is only very gradual, so shouldn’t have too much impact on borrowers or savers, but further interest rate rises are expected for the new year to combat rising inflation.

The good news is a high number of people across the UK are using fixed-term products, meaning that many Brits will not be subject to immediate changes to the cost of monthly repayment rates.

On the opposite side of the spectrum, those who have variable mortgages such as tracker mortgages will see immediate changes to costs. This type of mortgage follows an added rate as well as the Bank of England’s base rate as the standard.

Many homeowners and prospective homeowners are already struggling due to the cost of the items they use in day-to-day life increasing in price, with inflation continuing to soar.

If the mortgage rates do increase, as they will now be expected to, many Brits will find it more expensive to borrow throughout the upcoming months”, commented  founder and chief executive of UK Adviser, Maxim Cohen.

Although this is the first time since August 2018 that rates have risen, experts still feel that the “express train” that is the current UK housing market will continue undeterred.

Commenting on mortgage trends the industry is likely to see in 2022, Cohen added:

Although interest rates have now risen and are expected to rise again, mortgage trends such as low-cost deposits and high loan-to-value mortgages are set to continue, putting prospective homeowners at greater ease. The housing supply and demand discrepancy has increased house price growth through the UK, and it has also made the market a very competitive one. This trend seems guaranteed to feed into 2022.”

“Another trend that we can expect to see in 2022 is the ratio of average home prices to earnings remaining extortionately high. Recent figures show for first-time buyers the average house price is five times more than standard earnings. In areas such as London, the ratio is over 10 times more.

Low-cost deposits make purchasing a home more attainable as putting together a hefty deposit is often impossible for people on lower incomes. Throughout 2022, good borrowing/lending conditions and schemes like the 95% mortgage guarantee scheme will continue to help prospective buyers own a property of their own”, she said.

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