One of the most interesting stories this month came from new Zoopla research, which revealed that for the first time in months, renting is now cheaper than paying a mortgage on a monthly basis.¹ The higher cost of borrowing over the last few months has been felt by all mortgage-payers, including landlords, while demand for rental properties has increased. Let’s turn to the world of home-buying and how the market is affecting buyers and homeowners.


Lenders are optimistic despite the latest base rate increase

Inflation fell from 7.9% in June to 6.8% in July² – find out why in our latest investing market update. It’s still a long way from the 2% annual target, but the sudden decrease is a good sign that the Bank of England’s continued base rate increases are finally having an impact. However, it’s an impact that has been felt most by those remortgaging or hoping to buy a home.

At their last meeting on 3rd August, the Bank of England decided to increase the base rate of interest from 5% to 5.25% – the highest it’s been since 2008. As a result, homeowners on variable rate mortgage deals – especially tracker mortgages, which are linked to the base rate – will have seen the cost of their monthly repayments increase again. Despite this, high street lenders are feeling more optimistic about the rate landscape. Following the latest inflation figures, we’ve seen the big banks starting to reduce their own mortgage rates again, bringing back more competitive deals.

If you’re on a variable interest rate, or your current mortgage deal is coming up for renewal, we can talk you through your options. We search thousands of deals from over 90 lenders daily to help find the right mortgage for you. Head in-app to get free mortgage advice from an expert broker at Moneybox Mortgages.


House price growth remains sluggish

Home-buyers have been faced with the reality of higher mortgage rates on top of the wider cost of living crisis, with some taking the more cautious approach. To avoid overstretching themselves, some buyers have chosen to bid on smaller or cheaper properties to allow room in their budgets for higher mortgage repayments. Sellers have also had to accept market conditions – Rightmove have reported the biggest August decline in asking prices since 2018, and average asking prices on their platform have now fallen for four months in a row.³

The UK House Price Index is widely considered the most reliable indicator of the market, as it tracks the prices of all sold properties in the UK, including cash buyer transactions. Their latest figures state that the average UK property will now set you back just under £288,000 – that’s £5,000 below the recent market peak in November 2022. But, prices are still 1.7% higher than they were this time last year.⁴ Buyers are resilient and demand for housing remains strong among those who can afford mortgage repayments at current levels.

Halifax published new data this month suggesting that homes are more affordable now than they were a year ago. While it’s still a significant multiple, the average UK property now costs around 6.7 times the average salary for a full-time employee – down from a record 7.3 times the average salary this time last year. Wages excluding bonuses have risen by around 7% year on year.⁵

While this sounds like a good news story, this might give the Bank of England cause for concern at their September meeting. Wage growth generally leads economists to worry that inflation will increase, if companies increase their prices to protect their profit margins. All of this may mean that interest rates stay at relatively high levels for longer, but we’ll have to wait and see. 


Closing thoughts

While markets adjust to the new normal, it’s hard to predict if and when mortgage rates and house prices will level out. As we always say, there’s never a ‘perfect’ time to buy and property is a long-term investment like any other. For most people, the biggest obstacle at the moment remains affording monthly repayments at current levels. But, if you’re able to jump that hurdle now, there’s no reason to put off your home-buying or remortgaging plans. Lenders will check your ability to afford future rate increases – and if rates do fall, you could find that you’ve already been through the worst of it.


¹ Source: Zoopla Research, August 2023

² Source: Office of National Statistics (ONS) CPI Annual Rate of Inflation 

³ Source: Rightmove House Price Index, August 2023

Source: GOV.UK Land Registry (UK House Price Index for June 2023)

Source: Halifax Affordability Report


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