In a recent financial turn, Southampton residents are experiencing a wave of relief as mortgage rates across the UK take a surprising dip. This reduction, led by major lenders, signals a potential opportunity for the Southampton housing market, directly affecting homeowners, landlords and first-time buyers in the city.
Let’s delve into what this means for the local market, weighing up both the opportunities and the need for realistic expectations.
The Welcome Decline In Mortgage Rates
Leading the charge, Halifax announced on the 2nd of January a significant 0.83% cut in its re-mortgage deals, a move promptly followed by other financial institutions.
These cuts are not just numbers; they translate to substantial monthly savings for homeowners. For instance, on a £200,000 mortgage, this reduction could mean savings of £138 per month. As these lower rates become the new norm, they herald a brighter outlook for those looking to re-mortgage or enter the housing market.
For Southampton homeowners eyeing the market, this is a particularly opportune moment. The lowered rates could make transitioning to a new home more feasible, easing the financial burden often accompanying such a move.
Additionally, previously daunted by high entry costs, first-time buyers might find the market more welcoming, spurring a rejuvenation of property transactions in the area.
For example,
The average terraced house in Southampton in the last 12months sold for £260,716.
The mortgage on a typical 85% loan-to-value mortgage would be £221,609 (meaning a 15% deposit of £39,107).
If a Southampton first-time buyer bought their house last summer, when the average five-year fixed rate was 6.3%, the mortgage payments would be £1,308.55 per month (for the next five years).
At the time of writing this article, Halifax were offering an 85% loan-to-value, five-year fixed rate at 4.57%, yet HSBC were offering something even better, a 4.44%, 85% loan-to-value mortgage on a five-year fixed rate.
That means their mortgage payments would only be £1,040.56 per month.
The average Southampton first-time buyer purchasing a terraced house is, therefore, saving £267.99 per month or £3,215.87 over the year because of the fall in mortgage rates over the last six months.
As you can see, the drop in mortgage interest rates makes quite a difference and will be a welcome saving to most Southampton household budgets.
Economic Indications And Market Predictions
The trend of falling rates is expected to continue, fuelled by competitive market dynamics and a general anticipation of further interest rate cuts by the Bank of England. Financial experts are betting on a substantial drop in Bank of England base interest rates throughout 2024, with the money markets believing base rates will slowly reduce in small steps from the current 15-year peak of 5.25% down to 3.75% by the year’s end, making mortgages more affordable and possibly boosting the property market’s health.
However, amidst the optimism, Southampton homeowners must adopt a tempered view. While the cuts are substantial, the rates are still relatively high compared to the historically low rates in previous years. Homeowners looking to sell should be particularly mindful of this. Setting realistic pricing, reflective of the current economic conditions and buyer capabilities, will be crucial to successful transactions.
Advice For Southampton Homeowners And Buyers
For those considering a move or entering the Southampton property market, it’s an opportune time to reassess your options. Seeking financial advice and comparing the market can ensure that you benefit from the best available rates. The market is fluid, and staying informed will be vital to making financially sound and beneficial decisions in the long term.
Advice For Southampton Landlords
In Southampton, falling interest rates herald a prosperous time for landlords. As financing costs decline, the burden of mortgages and loans diminishes, enhancing profitability. Concurrently, rents are escalating at a rate outpacing inflation, often in double digits, amplifying income streams significantly. This dual boon means landlords can enjoy reduced operational costs while benefiting from increasing rental revenues, bolstering their investment returns in the vibrant Southampton property market. This positive shift in financial dynamics offers a promising outlook for existing and prospective landlords in the area.
Final Words On This Mortgage War
The recent drop in mortgage rates brings a fresh wave of optimism to Southampton’s property market. It opens doors for homeowners looking to move and incentivises first-time buyers. However, a balanced, well-informed approach will be essential, with economic indicators suggesting varied outcomes. Whether you’re planning to buy, sell or re-mortgage, understanding the market and setting realistic expectations will be crucial to making the most of this financial shift. Southampton’s property landscape is evolving and with careful consideration and strategic planning, residents can navigate this change effectively and advantageously.
If you are a Southampton homeowner, landlord or first-time buyer and you have any questions about buying or selling in Southampton in 2024, please call us on 023 8098 4041.
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