How GDP growth has affected housing

January 21, 2023

As the economy is performing better than expected and with interest rates coming down, this is bringing optimism back to the UK housing market.

Having a clear picture of the current state of the economy and where it’s headed, in addition to what’s happening with interest rates and mortgage deals, can help you understand how your property investments could be impacted.

It’s not always easy to predict what’s to come, particularly throughout times of uncertainty, but there are more and more signs of hope for the UK economy and mortgage market.

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Economic growth

Recent figures from the Office for National Statistics revealed monthly GDP, which measures the value of goods and services produced in the UK, is estimated to have grown by 0.1% in November 2022. This was better than analysts expected and followed growth of 0.5% the month prior.

Previously, the Bank of England had warned that the UK may enter a recession in the third quarter of 2022. However, it seems a recession, which is defined as two consecutive quarterly contractions, has been avoided for now.

As the economy is performing better than originally predicted, this is continuing to show its resilience. And this will likely have a positive impact on the UK housing market as 2023 gets further underway.

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Interest rates

Interest rates is another area that has a significant impact on the housing market. The latest rise to the Bank of England’s base interest rate came on 15th December. The rate was increased from 3.0% to 3.5%, which is a 14-year high and is the ninth consecutive rise.

However, some high-street lenders have reduced rates across their product range, including buy-to-let mortgages. Data from Moneyfacts revealed the average two- and five-year fixed rates fell month-on-month for the second consecutive month.

This illustrates a sense of stability returning to the mortgage market, which had seen average rate rises for 13 months in a row up to November 2022.

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Mortgage deals

In recent months, product choice has also improved across the mortgage market. Since October 2022, the number of mortgage deals on offer increased from 2,258 options to 3,643, according to figures from Moneyfacts.

With an increasing level of competition in the market, there are more mortgage deals with cheaper rates and fee-free options on offer. This is helping provide more confidence for homebuyers and property investors and will allow investment and buying plans to stay on track.

Rachel Springall, finance expert at Moneyfacts, said of the company’s findings: “Product choice within the mortgage market has improved in recent months, and the latest figures show volumes are at a much more stable level, however, the volatility with lenders adjusting such deals remains as the average shelf life of a mortgage product fell to 15 days, the joint lowest on Moneyfacts records. This activity has led overall fixed rates to fall and indicates the focus of lenders’ repricing strategies.”

The Bank of England’s first Monetary Policy Meeting of 2023 is set for 2nd February. Scores of mortgage-holders, buyers and property investors will be keen to see what’s announced and how that will impact the mortgage sector, and in turn the property market.

At The Prestbury Advisory, our team of experts can provide you with knowledge and advice of the UK housing market, whether you’re buying with a mortgage or not. If you want to speak to us about your next property investment opportunity, email us at contact@theprestburyadvisory.com or give us a call on 01625 725 779.