Lloyds Banking Group, Britain’s biggest mortgage lender, forecasts that the UK housing market will slow down in 2023, with prices rising just 1.8% this year and eventually falling 1.4% next year.
This prediction comes in the wake of the Bank of England preparing to raise interest rates again to the benchmark lending rate of 2.25% by the end of 2022 in an attempt to stem the highest inflation that the UK has experienced in four decades.
At the start of the Covid-19 pandemic, the Bank of England reduced interest rates to 0.1%. This rate continued for the next two years.
But since December 2021, the Bank of England has started raising interest rates. As of this writing, the average interest rates of home or residential property mortgages are at 2.9%.
This action, however, will negatively affect borrowers and homeowners who will have to deal with more expensive mortgage loans and borrowing costs. Many homeowners, in fact, are rushing to remortgage their homes before the interest rate increases are in place.
Lloyds Banking Group’s Chief Executive Officer, Charlie Nunn, confirms this and provides an example saying that the bank’s open mortgage loans increased only 1% in three months through June (or £296.6 billion) because customers are keen to lock in prices before interest rates are increased.
This isn’t immediately apparent now; residential property prices continue to be high because of the lack of supply in the UK property market (where prices have increased by 13% growth YTD). But expect this to happen by the end of the year.
Nunn adds he expects to see many customers become more careful with their spending and buying decisions in the coming months.
If you’re new to property investing or are a Gladfish client who wants more information and understanding about this current situation, call our team today on 02079236100 or book a chat to know more.