Mortgage affordability ‘wiggle room’ expected as base rate to stay low until 2025 – Savills

Mortgage affordability ‘wiggle room’ expected as base rate to stay low until 2025 – Savills


Savills UK senior analyst Lawrence Bowles also suggested chancellor Rishi Sunak should have delayed introducing the stamp duty cut and that a more targeted version of the government’s furlough scheme was likely.

Speaking at the Association of Short Term Lenders (ASTL) conference, Bowles (pictured) noted that previously the Bank of England was expected to increase its base rate to around 1.5 or 1.75 per cent by the end of 2024.

But latest forecasts suggest no rise in the base rate until middle of 2024 with rates remaining around 0.5 per cent in the middle of 2025.

“That is an unprecedented length of time for interest rates to be this low,” he said.

“So we can expect to see some affordability wiggle room emerge in terms of mortgage home owners and buyers, even with a slightly lower level of income growth than you would expect and higher unemployment figures.”

He noted that in the short-term that was not being reflected by borrowing rates.

“In the short-term we can expect to see interest rates show a larger premium to that base rate, as a result of that higher risk environment, that risk of higher unemployment,” he continued.

“But we expect to see that premium erode over the next five years, particularly with base rates remaining low over the next five-year period, which gives us more affordability wiggle room.”


Stamp duty holiday ‘mis-timed’

Bowles also suggested it would be “naïve” not to assume the chancellor doesn’t have a more targeted or form of replacement for the end of the furlough job retention scheme which ends in October.

But he added that the stamp duty holiday could have been better used.

“The stamp duty holiday is possibly mis-timed to some extent,” he said.

“We were seeing a recovery in housing market sentiment anyway and introducing that later rather than as the market was already in recovery was perhaps Rishi Sunak playing his hand too soon to some degree.”