AUGUST 2023

Last month, it was announced that Inflation had decreased in June to 7.9%. This was a significant fall from the 8.7% figure for May and surprised analysts, who had expected a smaller fall to only 8.2%.

LESS PRESSURE TO INCREASE BASE RATE ANY MORE

Financial markets now think that following the latest Base Rate rise to 5.25% (03 August 2023) the Bank of England should be under less pressure to raise interest rates much further.

It has been suggested that the very slow fall in inflation relates to the high proportion of borrowers who are still tied into five-year fixed mortgage rates for the next two to three years, so distorting the impact of trying to reduce inflation back to the 2% target.

LENDING RATES FALLING?

In the meantime, some UK mortgage providers have been modestly reducing their rates following the release of the latest inflation figure, but we have yet to see much downward movement in Jersey.

At the beginning of August, and before the latest increase, interest rates from all the local lenders could be found in the range from 5.70% up to 8.14%., which was a marked increase from January this year when rates were available from 4.45% up to 6.85%.

LESS ACTIVE PROPERTY MARKET

These high rates are reflected in the less active property market which has prevailed since the second half of last year. In the past few weeks however, it was particularly noticeable that vendors were starting to appreciate that prices had to fall, and we have seen reductions of up to 20% and in some cases more, on certain property sales.

A GOOD CHOICE OF REASONABLY PRICED PROPERTY

Looking at recently advertised property for sale in the JEP and on places.je, there were a total of 1498 listings, of which 407 were in the First-Time Buyer price range up to £500,000. With a further 309 in the price range of £500,000 to £700,000 – many being three or even four bedroomed houses, with parking and gardens.

These figures clearly indicate that asking prices are falling, and that for the first time in several years, a good choice of property is becoming available for couples and families to get on to the first rungs of the property ladder.

WHICH MORTGAGE PRODUCT?

There is constant debate about which type of interest rate to choose when an existing mortgage comes up for review, or when taking out a mortgage for the first time.

A tracker rate could be the best choice for the brave, but only if you think that interest rates are nearing their peak. This choice could put borrowers in a better position in the medium term than those who lock into a fixed rate now, as we may be nearing the peak of rate rises, and tracker rates should therefore start to fall as Base Rate reduces.

A NEW STATES LOAN SCHEME

If the Government is really committed to ensuring that property ownership is made available to everybody, then urgent thought should be given to the resurrection of the very successful Dwelling House Loan Fund scheme which was available for many years to thousands of very happy First Time Buyers, that offered a range of interest rates from 3.5% to 10%, subject to affordability. Any modified Government funded loan scheme should ideally have no requirement for a deposit, stamp duty on the transaction waived, a term of 40 even 45 years, and which could be linked to a low interest rate which would be means tested annually and increased according to affordability.

AN OVERVIEW OF THE BEST INTEREST RATES FOR AUGUST

• 2 year tracker     60% LTV 5.95%         prev. 4.49% (January)     
• 2 year tracker     90% LTV 6.39%         prev. 5.04% (January)      
• 5 year Fixed     60% LTV 5.74%        prev. 5.29% (January)     
• 5 year Fixed        90% LTV 6.14%         prev. 5.49% (January)       
• 10 year Fixed    60% LTV 5.30%         prev. 5.40% (January)   
• 10 year Fixed    90% LTV 5.75%         prev. 5.80% (January)   

Rates correct at 08 August 2023

For over 33 years, The Mortgage Shop has been helping Islanders to find the best mortgage at the most competitive interest rates – give them a call on 789830.