Catch up on Mortgage Strategy’s most popular stories this week. Michael Gove, the housing secretary, has expressed support for long-term fixed-rate mortgages that extend up to 25 years and Chancellor Jeremy Hunt is scheduled to hold a meeting with mortgage lenders on Friday. Read more below:
Gove throws weight behind 25-year mortgages
Michael Gove, the housing secretary, has expressed support for long-term fixed-rate mortgages that extend up to 25 years. He believes that these extended terms, commonly found in the United States and Canada, provide borrowers with greater assurance regarding their mortgage payments. Gove, in an interview with the Daily Telegraph, emphasises the importance of introducing such products in the UK, stating that they can contribute to overall leveling up. By adopting long-term, fixed-rate mortgages, borrowers can avoid fluctuations in their payment amounts every few years and instead have stability for up to 25 years. Gove suggests that exploring this approach is worthwhile.
Chancellor to hold mortgage summit on Friday
Chancellor Jeremy Hunt is scheduled to hold a meeting with mortgage lenders on Friday, where he will emphasize the importance of providing maximum assistance to borrowers grappling with high home loans. This gathering takes place against the backdrop of the average two-year fixed residential mortgage rate reaching 6.07%, as reported by Moneyfacts.
UK house prices to drop by 10%: OBR
According to the Office of Budgetary Responsibility (OBR), UK house prices are projected to decline by 10% from the fourth quarter high in 2022. This estimate indicates a one percentage point larger drop compared to the OBR’s previous forecast in November. Additionally, data suggests that property transactions are anticipated to decrease by 20% compared to their peak in the same quarter.
The Bank of England (BoE) has raised the base rate by 50 basis points to 5%, marking its 13th consecutive increase. This hike represents the largest rise since February, following two consecutive monthly increases of 25 basis points each. The decision to raise rates was supported by a 7-2 vote from the BoE’s Monetary Policy Committee, while two members opted to keep rates unchanged.
Nationwide approves roll out of Experian’s Open Banking solution
Nationwide has given the green light for the widespread implementation of Experian’s Open Banking solution to mortgage applicants using Smartr365 intermediaries, following a successful pilot program. This development eliminates the need for mortgage applicants to manually obtain bank statements and then send them to their broker for processing. Instead, the solution streamlines the process by saving brokers approximately 30 minutes per application, as it removes the steps of printing, certifying, scanning, and uploading the statements.
PM has no plans to introduce mortgage protection fund
Prime Minister Rishi Sunak has dismissed the idea of implementing a mortgage protection fund to aid households facing challenges with increasing mortgage payments. During an interview on ITV’s Good Morning Britain, Sunak declined to support additional assistance for mortgage holders, including the proposed £3 billion mortgage protection fund suggested by the Liberal Democrats at the end of the previous week
Rate rise reaction: Bank bids to grip inflation
Brokers and markets are likely to view the Bank of England’s decision to raise the base rate by 50 basis points to 5% as a positive signal that it is taking measures to address the persistent inflation in the UK. This marks the 13th consecutive increase in the base rate, reaching the highest level seen in 15 years. The decision was influenced by the inflation rate of 8.7% in the year up to May, which remained unchanged from the previous month, contrary to market expectations of a 30 basis points decline.
Connells Group chief exec to retire
David Livesey, the chief executive of Connells Group, has revealed his plans to retire in 2024. Livesey has a long-standing association with Connells, having joined the company in 1990 as mortgage services director. Over the years, he has held several senior roles within the organization and eventually assumed the position of chief executive in 2008.
Average resi two-year fix hits 6% – Moneyfacts
According to the latest mortgage data from Moneyfacts, average interest rates have reached the 6% mark. In the residential mortgage sector, the average two-year fixed rate rose from 5.98% on Friday to 6.01% today. Similarly, the average five-year fixed rate increased from 5.62% to 5.67%.
Inflation sticks at 8.7% in May, prompts fears of higher rate rise
Consumer prices remained steady, with an increase of 8.7% in the year up to May, according to data from the National Office for Statistics. This has raised concerns of a potential higher base rate rise. The consumer prices index remained elevated due to rising prices for airplane tickets, recreational and cultural goods and services, as well as second-hand cars. Economists had anticipated a slight decline in the inflation rate to 8.5% in May, leading to disappointment with the unchanged figure.
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