In a recent episode of The Home Stretch podcast, CEO of The Guild of Property Professionals, Iain McKenzie is joined by Peter Brodnicki, CEO of the Mortgage Advice Bureau, to discuss the topical issue of mortgages rates and how they are impacting the market.

According to Brodnicki, the market has been slowly starting to recovery from the tumultuous fourth quarter of last year, but stubborn inflation continues to see the Bank of England pushing rates up. There is certainly strong underlying demand for property and the market has remained resilient with mortgage brokers still seeing a reasonable level of purchase demand, but as rate rises continue to bite, the market is likely to slow. “We are now seeing rates start with a six, with another rate rise or two likely, although the larger than expected fall in inflation announced a few days ago is helpful. I think this is something that we will have to get used to for a while until inflation can be brought under control, as whilst it sits over 3% it is difficult to see interest rates falling. When inflation falls, we should see rates decrease fairly quickly, but we should not expect this to happen in the short term,” he adds.

In response, McKenzie says that for those that have been in the sector for some time, transacting in a world where interest rates are high is nothing new. “That said, what is the impact of the very sharp rise in terms of the consumers’ mindset? Are people putting off their decision to buy thinking rates are going to come down at some point and we possibly get back to a zero percent or one percent base rate? Or is this just the new norm and people are accepting it?” he asks.

Brodnicki answers, if you are buying then certainly some will definitely be postponing their decision to do so. It is however a timing issue as you never really lose a housing transaction. “The opposite applies to re-mortgaging or locking in a product transfer, as the urgency to do so has never been greater. Earlier in the year there was some reluctance to commit to a fix rate when there was talk of interest rates peaking, with predictions that they may start to fall within 12 months. Rates have however continued to rise and now any prospect of rates falling has been pushed back. When rates got to around 4%, five-year fixed rates were popular, but as rates have continue to rise, with talk of more rises to come, then shorter two-year fixed deals are proving more popular. Of course a lot of people are still on fixed-rate mortgages taken out several years ago, and so the government’s plans to curb spending by increasing interest rates doesn’t impact the majority of borrowers in the short term, therefore limiting the impact of rate rises on inflation,” he adds.

McKenzie and Brodnicki go on to discuss several other aspects around mortgages and the market, such as products being pulled at the last minute, the challenges facing consumers and brokers alike, the government’s thinking behind their interest rate strategy, transactional volumes and potential buying patterns we could see unfold in the next few years, the Mortgage Charter and advise to agents. 

To hear this conversation in full, visit The Home Stretch podcast.