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Weathering the Storm: The Mortgage Crisis Unraveled

The Bridging Group - mortgage crisis continues to present challenges

The current mortgage crisis has left homeowners grappling with high repayments, but amidst the challenges, there are glimmers of hope on the horizon.


As the Bank of England continues to increase rates, analysts predict that borrowers may have to endure elevated mortgage repayments for at least another two years.


However, despite the recent surge in rates, several high street lenders, including NatWest, Halifax, and Virgin Money, have made efforts to ease the burden by cutting rates for mortgage borrowers. This follows similar rate reductions by Nationwide, Barclays, TSB, Santander, and HSBC in the previous week.


Although mortgage rates have risen since the end of 2021, data analysts from Moneyfacts reveal that the average two-year fix is currently at 6.85%. This indicates a slight improvement in rates compared to earlier in the year.


Traditionally, two-year fixed rates have been more affordable than five-year deals, but the situation has reversed over the past year. While this may appear concerning, there's reason to believe that things are stabilizing, as the gap between the two has marginally reduced, now sitting at 0.49%.


Economists have differing views on house prices. HSBC predicts a modest 1.3% drop in prices for the year, thanks to high employment levels and wage growth, which enable households to weather the impact. Moreover, a dwindling housing supply may contribute to supporting prices.


If unemployment were to spike, more homes might flood the market through forced sales, potentially leading to lower prices. The Bank of England has forecast further house price falls of 5.7% in 2024 and 1.9% in 2025. Meanwhile, Capital Economics offers a more cautious outlook, predicting an additional 6.5% drop in prices.


Amid these uncertain times, homeowners with a remortgage looming should take heart. Most mortgage lenders offer the flexibility to reserve an interest rate for up to six months in advance. By hedging their bets and keeping an eye on rates, borrowers can switch to better deals if rates become more favourable.


The optimal time to purchase a property could be the second half of 2024, as rates are anticipated to fall around that time, holding at approximately 5.75% across competitive lenders. Moreover, the Government may consider tax cuts if inflation falls below 4% in 2024, and there could be additional support for first-time buyers.


While the mortgage crisis continues to present challenges, borrowers can take solace in the fact that lenders are making efforts to alleviate the impact. By staying informed and planning wisely, homeowners can weather this storm and navigate towards a more secure financial future.


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