At a time when all households are feeling the squeeze, with the cost of living crisis and recession upon us, we could all do with some good news. With all the political upheaval over the past few months, which drove up the cost of borrowing, the UK needs stability, and hopefully we have finally found that in Rishi Sunak, our new Prime Minister. One of his top priorities is to get the UK's finances in order and to bring down the cost of borrowing for both households and businesses.
Liz Truss's government was a complete disaster, with her unfunded tax cut plans resulting in lenders withdrawing around 1,700 mortgage products in the space of a week. They were then reintroduced 1 or 2 percentage points higher than before.
As of writing, mortgages in the UK are now ridiculously expensive, averaging at over 6%. This has made it difficult or impossible for many people to move home or to get on the property ladder in the first place. Gone are the days of 2% mortgages, however Rishi Sunak has great plans for providing more financial and economic stability to the country, and that includes rescuing the housing market. The property market is a very important part of the UK economy, so it needs to be kept healthy and thriving.
Lower Mortgage rates for 2023
With Rishi in power, mortgage rates are set to return to 4-5% next year. In the last couple of weeks, borrowing costs have started falling for the government and businesses, and will drop even more in the weeks to follow. And mortgage rates have already started to fall for new businesses. As soon as the new Prime Minister was announced, several lenders said they would drop their rates considerably for businesses and buy-to-let mortgages from 26th October. This is just the start, and will likely snowball. The "stress test" (to determine affordability) has always been the biggest hurdle to overcome for those seeking buy-to-let mortgages. However, "The Mortgage Works", which is the mortgage lender of buy-to-let mortgages for Nationwide Building Society, have announced that they have lowered this for new applications. This is very good news and a positive sign for things to come.
Mortgage rates in general have started lowering this week, with Santander cutting some fixed-rate mortgages by as much as 0.5 percentage points, while Accord Mortgages of the Yorkshire Building Society have reduced theirs by up to 0.53 percentage points.
Plans for building new homes
Michael Gove has been reinstated as housing secretary, and it looks as if the 2019 manifesto still stands regarding their commitment to providing more jobs and investment, which will in turn result in the building of much-needed new homes. The government wants to see more people owning their own home, but that is unlikely to happen unless more affordable homes are built.
Rishi Sunak expressed the importance of building new homes several months ago during the summer leadership election, along with the infrastructure to support them. He stated that he favours "reforms to increase density in our inner-cities, investing in regenerating brownfield land across the country, and pursuing developments that have community support."
It's good to see that the top priority for our new government is to get the economy moving and to cut the costs of borrowing, so maybe 2023 will be the year when you can finally make that move into your dream home?