We are seeing lenders across the market withdraw rates as headlines around interest rates soaring to 6% have spooked both lenders and borrowers.
Lenders will now be much more cautious about lending to people as 6% interest rates may be unaffordable for many while borrowers who are coming to the end of their deals are flooding telephone lines trying to get a fixed rate deal in light of a difficult period on the horizon.
Lenders’ systems have been crashing with long virtual queues for borrowers and advisers trying to get them or their clients a deal at current rates.
In fact, we are seeing more and more people look to suffer early repayment charges just to get the certainty of mortgage costs. Rates that were available one hour are gone the next which is making it a tricky time for buyers.
Rates of 6% could prove disastrous for the property market as people simply won’t be able to afford their mortgage payments if they have overstretched themselves. This could cause a wave of properties come to market just when demand is drying up. House prices will naturally come down if this happens.
However, we are still suffering a severe lack of stock in the market and an ever increasing population of renters wanting to buy so house prices may not see a severe crash but a downturn is very likely in the short-term.
The stamp duty cut will also help keep demand in the market but how much is yet to be seen considering the economic backdrop many people are trying to cope with.
The mini-budget on Friday attempted to grow the economy during difficult economic times and particularly the stamp duty cut was designed to help boost the housing market.
However, following it investors have voted with their feet and the pound dropped significantly as a result.
This will serve to compound the problems many face with the cost of living set to climb higher.
This will naturally impact the housing market which over the last few years has defied the odds in the face of very tricky times. However, in the age of crises, this one may prove to be a step too far.
Karen Noye is mortgage expert at Quilter
