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Economists predict that the Bank of England’s decision to decrease interest rates will help ease the impact of rising mortgage payments in 2024.
At the beginning of the year, homeowners are met with a more optimistic outlook as lenders reduce their rates. Some fixed-term offers are now being offered below 4 percent.
However, experts at Goldman Sachs predict that Britons will experience a rise of £19 billion in mortgage expenses by the end of 2025 when their current mortgage deals come to an end.
The large investment company stated that the outlook was relatively optimistic, despite previous warnings about the UK facing a potential £30 billion mortgage payment crisis.
Goldman Sachs predicts that the Bank of England will begin to decrease the base rate from 5.25 per cent starting in May, resulting in a faster decline in borrowing expenses than previously anticipated.
According to James Moberly, an economist at the investment bank, the decrease would result in a total rise of £19bn in mortgage payments by the end of 2025. This is significantly lower than our previous estimate of approximately £30bn.
The specialist stated that the highest increase in mortgage payments will probably occur in the first half of 2024, which is earlier than we expected.
Lenders reducing rates makes the outlook more positive for individuals purchasing a home for the first time.
According to the think tank, The Resolution Foundation, approximately 1.5 million households will need to refinance their mortgages in 2024. This could result in the average family paying an additional £1,800 per year.
Economists predict that the recent base rate cuts by the Bank of England will motivate lenders to provide more attractive deals, resulting in more positive projections for the beginning of the year.
The monetary policy committee of the Bank is set to convene once more on February 1st to determine the next course of action regarding interest rates.
Financial experts anticipate that the Bank will initiate a decrease in interest rates during the spring season. There is speculation among economists that these rates could drop as much as 3 percent by the conclusion of 2024, creating a sense of positivity in the market.
However, Torsten Bell, the chief executive of the Resolution Foundation, reminds homeowners to be aware that despite potentially lessening the burden, many will still experience significant increases in their mortgage payments.
HSBC recently introduced a highly-publicized fixed rate of 3.94 per cent for a five-year period, while Halifax, TSB, and other lenders have also reduced their mortgage interest rates. To start off the new year, Halifax decreased its fixed rates by almost 1 per cent.
According to the Moneyfacts website, the average interest rate for a two-year fixed deal decreased from 5.92% to 5.87% on Thursday.
Nathan Emerson, CEO of Propertymark, expressed a desire for the Bank of England to gradually reduce interest rates in order to boost growth in the housing market.
According to Sir Howard Davies, Chairman of NatWest, it is not a challenging task to become a homeowner.
Sir Howard Davies, chairman of NatWest, caused surprise by stating that it is relatively easy to purchase a home in the UK.
The statement was made during an episode of BBC Radio 4’s “Today” program, prompting the host Amol Rajan to question if the speaker was reporting from a different country due to the difficulty of buying a house in the UK.
Mortgage brokers strongly criticized Sir Howard, the NatWest chief, for not comprehending the challenges faced by young individuals trying to purchase their first home. Stephen Perkins, managing director of Yellow Brick Mortgages, expressed that Sir Howard’s remarks were unacceptable and he should feel ashamed.
He stated: “It is exhausting to read comments from individuals who purchased their initial house for approximately £10,000 with a small down payment and a mortgage that was two to three times their income. These people are completely unaware of the difficulties that first-time home buyers encounter when trying to enter the housing market.”
In 2023, a prominent lender reported that the housing market in Britain exceeded predictions, with the average value of a UK property increasing by £4,800 by the end of the year compared to the end of 2022.
Halifax reported that property values saw an average increase of 1.7% in 2023. Additionally, the average house price saw a month-on-month rise of 1.1% in December, marking the third consecutive monthly increase.
In December 2023, the average cost of a house in the UK was slightly above £287,000, which is an increase from around £282,000 in the previous year.
Source: independent.co.uk
