BASE RATE HELD FOR SECOND MONTH

The Bank of England has now held Base Rate at 5.25% for the second consecutive month, which is a clear indication that the drastic increases over the past 15 months are at last having an impact on inflation. This should not be interpreted as meaning that the inflation threat has been conquered or that further increases can be ruled out. 

Despite this news, mortgage rates have been dropping for a number of weeks as mortgage providers, start to take the view that they will not do any business if they link their products to Base Rate. Homeowners and prospective purchasers new to the market should however take care when choosing their new mortgage from the range of fixed rates that are currently available.

TWO OR FIVE YEAR FIXED RATE?

Whilst two-year fixes are generally more expensive than five-year fixed options, anybody searching for a new product should seriously consider a term of no longer than two years. During the course of the next twelve months or so, interest rates could fall which means subscribers to a five-year fixed option are likely to be paying out more than if they were to choose a two -year fixed option. This will provide the greater comfort to borrowers of knowing that they are not committed to a rate which will cost them a lot more in the long run.

LARGE NUMBER OF PROPERTIES FOR SALE

Looking at places.je the online Jersey property portal, there are a total of 1555 houses and apartments that are currently listed – this is a significant increase since the beginning of the year.

Of these, no fewer than 405 are under £500,000, so offering a wide choice to First Time Buyers, whilst a further 324 are on the market in the range between £500,000 and £700,000, being ideally suited for those wishing to trade up to a family home.

Such a wide choice of property in a small environment like Jersey is exceptional, although many vendors in the marketplace are still unaware of the fact that the market has stalled due to a combination of unrealistic asking prices and the overall inability of all mortgage providers to match borrowing needs based on affordability, that they were previously able to.

STRESS TESTING ALL MORTGAGE APPLICATIONS

Lenders apply a stress test to all mortgage applications which means that borrowers can no longer raise as much capital as was possible up to the time that Base Rates started to rise. Due to this, the only way for the market to revive is for vendors to seriously review the price that they need to be asking for their property.

BEST MORTGAGE RATES IN THE MARKET

There has been little change in mortgage rates since last month, and it will be interesting to see what will happen in the ensuing weeks now that base rate appears to have stabilised.

Bank of England Base Rate 5.25%

2-year Tracker rate 60% LTV: 6.04% (January 4.44%)

2-year Fixed rate 60% LTV: 6.24% (January 5.79%)

2-year Fixed rate 90% LTV: 6.64% (January 5.49%)

5-year Fixed rate 60% LTV: 5.74% (January 5.29%)

5-year Fixed rate 90% LTV: 6.19% (January 5.49%)

Rates correct at 06/11/2023