Higher mortgage rates prompt a strategy shift for borrowers
Making sense of the latest trends in property and economics from around the globe
3 minutes to read
Responding to shocks
Rishi Sunak looks set to become the UK's next Prime Minister after Boris Johnson dropped out of the contest last night. It remains unclear whether the third viable candidate Penny Mordaunt would still stand or whether Sunak would be given a coronation, according to this morning's Times.
Sterling rose half a cent against the dollar in early Asia trading. That follows news on Friday that Moody's cut the UK's outlook to 'negative' from 'stable', citing “heightened unpredictability in policymaking” amid weaker growth prospects, high inflation and “risks to debt affordability from likely higher borrowing.”
The agency said the UK would keep its Aa3 credit rating, however: "The country’s longstanding institutional framework remains strong and will continue to support the UK’s ability to respond to shocks, as seen during the pandemic. Furthermore, the structure of the UK government debt, with a very long average maturity of around 15 years, as well as a deep domestic investor base adds a degree of resilience to the credit profile in the face of shocks."
Tracker mortgages
The cost of fixed rate mortgages surged in the wake of the mini-budget and average two-year fixed rate products across all LTVs now sit at 6.65%, according to Moneyfacts. That's prompting many borrowers to change tack:
Searches for tracker mortgages surged by 115% in the seven days to Oct 17 compared with the week before the mini-Budget, according Twenty7Tec data covered in the Telegraph. It recorded 95,000 searches last week – a 13% increase on the week before.
“I have not seen this level of demand for variable rate deals since before the pandemic," Simon Gammon of Knight Frank Finance tells the paper, though buyers committing to trackers tend to be those in prime markets with enough saved to weather large increases in mortgage rates, he added.
Meanwhile banks have withdrawn significant chunks of their high LTV ranges, according to Moneyfacts data covered in this morning's FT. The number of mortgages at a 95 per cent loan-to-value dropped from 347 at the start of the year to 135 as of last Friday.
Back to school
The deadline for secondary school applications is at the end of this month so we have pinpointed housing markets across England that offer the best value with access to an outstanding-rated secondary school.
We analysed more than 500 outstanding-rated secondary schools in England and compared the average sale price for a house within 2km of the respective postcode district to the local authority average. In London we reduced the radius to 1km to reflect the greater density of housing and population.
Outside of the capital, Yorkshire and The Humber dominates the list. In the capital, outer London predictably offers the best relative affordability with access to top-rated secondary schools. The average sale price in SM4 in the London Borough of Merton, which includes the areas of Wimbledon and Mitcham, was 27% below the local authority average in the 12 months to April 2022 - see the piece linked above for the full lists.
Housebuilding targets
As of today, the government intends to push on with scrapping the long-held target of reaching 300,000 net additional homes each year. It is one of several planning reforms that survived Chancellor Jeremy Hunt's overhaul of Liz Truss's policy framework.
The OBR will publish forecasts for housing delivery alongside the fiscal event on October 31st, and the Home Builders Federation (HBF) has written to the spending watchdog suggesting the government's policy proposals would result in annual housing completions dropping as low as 140,000 - a drop of 100,000. The Telegraph has seen the letter.
Local councils, which are responsible for allocating land for development, will “significantly reduce” planning permissions when pressure from Whitehall is removed, the group said.
In other news...
Are retail sales really lower than pre-Covid? Stephen Springham takes a look.
Elsewhere - China home sales fall for a 13th month (Bloomberg), China’s economy will not overtake the US until 2060, if ever (FT), and finally, house prices in towns and cities recover as lockdown race for space abates (Times).