July Update: May's Inflation Rises & House Price Growth

Rising Costs For The Consumer  

Firstly, last month the UK saw the Bank of England increase the base rate again, this time to 1.25% (by a further 25 basis points), marking the fifth rise in the base rate since December 2021. This increase highlights the Bank of England’s intention to try and counteract rising inflation rates; however, a higher base rate ultimately means that mortgage lenders will be charged more. This cost increase often filters down to the customer to foot the bill, resulting in additional cost considerations when applying for mortgages. 

In addition to this, new data released from the Office For National Statistics demonstrated a 12.4% annual increase in the average house price in the UK. This brings the average house price growth in June to a whopping £368,614. The rising prices are predicted to slow down over the coming months, with Rightmove predicting that house price growth will likely fall to 5% by the end of the year (and be at 3% for London).

What Does This Mean For First-Time Buyers?

With the ongoing uncertainty surrounding the property market and house prices continuing to grow, many first-time buyers are left with a steep battle to get onto the property market in the first place. Recent statistics show that, on average, buyers now face an average interest rate of 3.37%, compared to 2.64% in December 2021, for a five-year fixed-rate mortgage loan. Based on a £250,000 mortgage loan with a 25% deposit, for example, this rise in the interest rates would result in an average increase of £870 a year for the consumer. 

It is hoped that with the pace of house price growth starting to slow down, sellers will set more affordable and realistic house prices when putting houses on the market. There are many potential contributing factors for this documented slowdown, including a decrease in affordability with rising costs of living and house price drops in line with seasonal changes. 

However, there are conflicting views from other household names. Zoopla does not predict house prices to fall in 2023, as buyer demand is still going strong; however, buyers may face further difficulties as mortgage rates are set to climb. 

Get In Touch With Our Mortgage Experts Today! 

If you happen to be a first-time buyer and you’re unsure what this means for you, we’re here to help! CG The Mortgage Experts in Kettering are on-hand to advise you of the products available on the market for your bespoke needs. Contact us today to get started!