MTTM Podcast Episode 507 – UK Property Special: Latest on Mortgage rates, Products, Affordability tests & House prices

Listen to Episode 507

In this week's podcast I provide a comprehensive update on the UK property and mortgage market. I reveal the latest Bank of England interest rate predictions, provide a snapshot of the best mortgage deals currently available and how you can lock in a mortgage rate in advance of your existing one ending. I also discuss the re-emergence of 100% (zero-deposit) mortgages, detailing the newly launched products and eligibility requirements. Next, I provide an update on changes to affordability, with lenders offering higher income multiples and relaxing stress-testing rules. Finally, I take a look at what is happening with house prices using the latest data from the UK's main house price indices.

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Episode 507 Podcast Summary

Where are interest rates heading?

Summary

I provide an analysis of the latest market predictions for the Bank of England base rate over the next five years. I explain that while the Bank is in a rate-cutting cycle, forecasts now suggest rates will stay higher for longer than was anticipated just a few months ago. The projection in early June 2025 indicates the base rate will be around 3.85% by the start of 2026 and potentially rise back to 4% by 2030. This shift is a key reason why some fixed-rate mortgages have started to increase recently.

Key insights

• Higher for Longer: Compared to predictions made a few months ago, the market now expects interest rates to remain higher for a longer period.
• Impact on Mortgages: The outlook for the Bank of England base rate has a direct influence on the cost of fixed-rate mortgages. As predictions have shifted upwards, some lenders have started to increase their mortgage rates.
• Current Forecast: As of early June 2025, the base rate is predicted to fall to around 3.85% by the beginning of 2026 and hover between 3.7% and 4% through to 2030.
• Volatility of Predictions: These forecasts are based on market swap rates and change frequently, so they should be taken as a guide.

The best mortgage deals & how to lock one in

Summary

I reveal the best fixed-rate and tracker mortgage deals on the market as of early June 2025, covering 2, 5, and 10-year fixes at various loan-to-value (LTV) levels. I also share a personal example of how I locked into a new mortgage deal with my existing lender before my current one expires to protect against potential rate rises.

Key insights

• Act in Advance: You should speak to a mortgage adviser around six months before your current deal ends. Many lenders allow you to lock in a new rate on a product transfer 3-4 months in advance.
• Locking In a Rate is Flexible: Securing a new rate with your existing lender early doesn't commit you. You can still switch to a better rate from your lender or remortgage to a different provider if a better option becomes available before your new term starts.
• Watch Out for Fees: Always consider the total cost of a mortgage, including arrangement fees, which can range from under £500 to as much as £2,000.
• Speak to an independent Mortgage Adviser: Read our article on 'How to find a Mortgage Adviser you can trust'
• Check out our Best Mortgage Rates article: Check out our regularly updated 'Best Mortgage Rates' article.

Can you really buy a house with no deposit?

Summary

I talk about the return of 100% LTV, or zero-deposit, mortgages. I reveal highlight the latest products to hit the market, including Skipton Building Society, April Mortgages, and Gable Mortgages. While these products open a path to homeownership for those struggling to save a deposit, they come with strict eligibility criteria, such as a proven rental history or minimum income requirements.

Key insights

• 100% Mortgages are Back: Several lenders have launched mortgages that do not require an upfront deposit.
• The Downsides: 100% mortgages have significantly higher interest rates than those requiring a deposit. For example, a 100% LTV 5-year fix was showing a rate of 5.37%, compared to 4.83% for a deal with a 5% deposit.
• Negative Equity Risk: If you buy with no deposit and house prices fall, you will owe more than your home is worth (known as negative equity). This could make it difficult to remortgage.
• High Fees: Some 100% mortgage products, particularly from Gable Mortgages, can come with very high upfront fees (and in some cases, these cannot be added to the loan).

How much can you borrow? Income multiples & stress tests explained

Summary

In this section I discuss mortgage affordability. Several lenders are now offering higher income multiples, with some stretching to 6 or even 7 times salary, although these often come with conditions like requiring a longer-term fix. Additionally, major lenders like Halifax and Nationwide have relaxed their affordability "stress tests," which could significantly increase the maximum borrowing capacity for a typical household.

Key insights

• Higher Income Multiples: Lenders like Nationwide and Atom Bank are offering up to 6 times salary. April Mortgages may offer up to 7 times salary for those taking a 10 or 15-year fix.
• Joint Applications: These higher multiples apply to joint applications, multiplying both salaries and boosting combined borrowing power.
• Relaxed Stress Tests: Lenders like Halifax and Nationwide have reduced their stress test rates, meaning applicants may now be able to borrow significantly more than they could previously.
• Shop Around: These changes mean you might be able to get a better deal elsewhere even if you were restricted in the past. Don't assume you have to stick with your current lender.

What's happening with UK house prices?

Summary

Finally, I take a look at the current state of the UK housing market by comparing data from four major indices: the UK House Price Index (from official completed sales), Nationwide, Halifax, and Rightmove (based on asking prices). The data presents a mixed picture, but a key takeaway is the significant gap between Rightmove's high asking prices and the actual sale prices recorded by other indices. This suggests that the market is favouring buyers and that sellers need to be more realistic with their pricing to attract serious interest.

Key insights

• A Mixed Picture: The major indices show slightly different pictures of the market. The UK HPI showed a 6.4% annual rise in March, while Rightmove showed a much lower 1.2% annual rise in asking prices in May.
• Asking vs. Selling Price Gap: There is a large gap between the average asking price (£379,517 on Rightmove) and the average prices from indices based on mortgage approvals or completed sales (around £271,000-£297,000).
• It's a Buyer's Market: The gap between asking and selling prices, along with commentary from Rightmove, indicates that buyers have more negotiating power than in recent months.
• Advice for Buyers: Don't take asking prices at face value. There is likely room for negotiation.
• Advice for Sellers: To achieve a sale, you may need to be realistic with your initial pricing. Over-optimism could lead to your property sitting on the market.

Episode quiz 

1. Where is the Bank of England base rate predicted to be in January 2030?
a) Around 3.5%
b) Around 4.0%
c) Around 4.5%
d) Around 5.0%

2. Why did the Financial Conduct Authority (FCA) express concern about mortgage stress tests, prompting some lenders to relax their rules?
a) They were worried the tests were too easy and putting banks at risk
b) They felt the tests were unduly restricting access for people who could otherwise afford a mortgage
c) They wanted to slow down the housing market to control inflation
d) They believed the tests were causing mortgage arrangement fees to increase

3. What is one of the major drawbacks of choosing a zero-deposit (100%) mortgage compared to one that requires a deposit?
a) They are not protected against interest rate rises
b) They are only available as variable-rate products
c) The application process takes over a year to complete
d) The interest rates are typically far higher

4. In terms of the latest house price data, what is the current state of the property market?
a) It is a strong seller's market where most homes sell for above the asking price
b) It is a buyer's market where there is more room for negotiation
c) The market is stagnant, with very few properties being bought or sold
d) The market is identical to how it was three years ago

5. Which house price index is considered the most accurate because it's based on actual completed sales?
a) The Rightmove House Price Index
b) The Halifax House Price Index
c) The UK House Price Index (UK HPI)
d) The Zoopla House Price Index

Answers

1. a) Around 4.0%
2. b) They felt the tests were unduly restricting access for people who could otherwise afford a mortgage
3. d) The interest rates are typically far higher
4. b) It is a buyer's market where there is more room for negotiation
5. c) The UK House Price Index (UK HPI)

Resources

Links referred to in the podcast:

• Where next for interest rates? Check out our predictions
• Best Mortgage Rates in the UK
• Mortgage Comparison Tool
• How to find a mortgage broker you can trust
• Skipton track record mortgage review
• April mortgages launches zero deposit mortgage options
• Gable mortgages' zero deposit mortgage options
• What is going to happen to UK house prices?

 

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