JUNE 2024

JANUARY OPTIMISM

The January optimism for Bank of England base rate reductions has now waned, although the lure of lower interest rates which might become available later this year and into 2025 will help to drive property sales forward.

Asking prices are continuing to fall in Jersey, and this downward trend will have to be maintained before the market returns to a degree of normality.

Everybody believes that rates will fall later this year. The only question is when, and until that time, the economy will remain in a state of suspension. The Bank of England, the US Federal Reserve and the European Central Bank work together and any reductions by the Bank of England will be influenced by what is happening elsewhere in the world.

WHEN WILL BASE RATE FALL?

The UK market is now forecasting that Base Rate is unlikely to fall until August, with two reductions each of 0.25% before the year end when Base Rate will then become 4.75%. By the end of 2025, it is predicted to fall to 4%, before reducing slowly to approximately 3.5% in 2029. Do remember that these are forecasts only, although they at least give borrowers an indication of trends which is so important when choosing which type of mortgage to choose for the future.

Mortgages from the island’s providers are available in fixed and tracker options, with the fixes being available for periods of two, three and five years, and occasionally seven or ten years. Fixed rates carry a high early repayment penalty which means that should rates fall in the next twelve months, borrowers locked into a five year rate, for example, could find themselves having to pay a 4% penalty to move to a more attractive rate of interest. Tracker rates, whilst being the most expensive, do not tie the borrower into a specific term which will carry a high early repayment penalty, which means that the borrower can immediately benefit from any reductions in Base Rate.

FIXED OR TRACKER

Should rates go up however, the tracker will also increase so that the choice of this product must be made carefully. It is interesting to see that many of our borrowers at The Mortgage Shop are locking into two year fixed rates as this gives them short term protection should rates rise as well as the opportunity to ‘’bale out’’ into lower rates in two years time if the forecast trend continues.

The Base Rate which we are currently experiencing is due to exceedingly high inflation which resulted in the Bank raising the rate fourteen times since December 2021 in an attempt to reduce inflation which has now fallen to 2.3%, down from a high of 11.1%. While this is close to the 2% target, it is unlikely that Base Rate will be reviewed until this figure has been reached.

The Bank has also said that it will have no hesitation in increasing Base Rate further if inflation remains persistent and above target.

 

 

GENERAL ELECTION

It is suggested that the impending General Election could have an impact on reducing Base Rate, although the clamour from Westminster is unlikely to influence the Bank which has been totally independent since 1997, and who have shown in recent months that it will not countenance any interference despite the widespread damage that its policy is causing to the home owning population.

Jeremy Hunt, the chancellor has warned against monetary loosening until the Bank is ‘’ absolutely sure that inflation is on a downward trajectory, and that the Bank should not rush into a decision that they have to reverse at a later stage ‘’.

MORE PROPERTY BEING PLACED ON MARKET

Our monthly look at the property site places.je shows that the number of houses and apartments has once again increased to 1530, with 427 in the range up to £500,000 and a further 468 in the price bracket between £500,000 and £700,000.

This number of listings is a clear indication that homeowners are keen to get on with their lives rather than waiting for things to improve. This also gives potential purchasers a far greater opportunity to negotiate which in turn will bring prices back to a more sensible level that will match mortgage providers’ affordability criteria.

BEST RATES

Best Rates this month have remained the same as May, which is not surprising, although the next few months should show some interesting changes.

Bank of England Base Rate 5.25%
2-year Tracker rate 60% LTV	June 2024 5.75%	May 2024 5.75%	January 2024 4.44%
2-year Fixed rate 60% LTV	June 2024 5.34%	May 2024 5.34%	January 2024 5.79%
2-year Fixed rate 90% LTV	June 2024 5.64%	May 2024 5.64%	January 2024 5.49%
5-year Fixed rate 60% LTV	June 2024 4.84%	May 2024 4.84%	January 2024 5.29%
5-year Fixed rate 90% LTV	June 2024 5.14%	May 2024 5.14%	January 2024 5.49%

 

Rates correct at 03/06/24