Falling mortgage rates signal optimism for home buyers, but now we need to unlock the supply

We are now just a week on from the Bank of England’s announcement that they were increasing interest rates by a further 0.25% as they try to bring inflation under control. I was particularly frustrated for everyone on variable rates, those looking to buy a home, looking to remortgage, or possibly putting their life plans on pause.

Yet, within the last week headlines from mortgage lenders are sparking signs of optimism.

With inflation starting to fall, confidence in the medium term continues to grow and high street lenders, such as HSBC and Nationwide, have reduced their mortgage rates by around 0.5% across their selection of two, three and five year fixed-rate offers.

This is promising and I hope this will provide more certainty for people looking to remortgage, move or buy a new home.

Speaking to our customers and homeowners, we know that people still want their own homes. Housebuilding is just one part of the jigsaw, but a ‘home’ allows people to take the next steps in their lives, with their families and friends, make that next career move, or build communities. This demand is encouraging, yet we have heard too often of people unnecessarily putting their lives on pause while the Bank of England rates keep changing.

While tackling inflation is not widely disputed, it does feel as though homeowners and buyers are being unfairly singled out. While lenders start to reduce fixed-rate mortgages, people who are on a standard tracker mortgage will now pay around £25 per month more for their house following last week’s rate rise. Yet, people without a mortgage will only benefit from higher savings rates. Surely if we’re all in this together, a more balanced approach needs to be considered?

Now the medium-term outlook is looking more promising, homeowners and buyers should talk to housebuilders to understand the different schemes that may be available. They should also talk to financial advisors who may be able to help navigate the complex range of mortgages, preferential rates that might be available through brokers, and schemes to get the best deal for their circumstances.

We also know that most people want to play their part in reducing their carbon footprint, reducing their energy consumption, and reduce their overall energy bills. New build homes are significantly more energy efficient and can be up to £200 cheaper to run each month. And well-designed new communities will play a key role in supporting biodiversity net gain, providing essential infrastructure improvements, supporting jobs and local economies.

Tackling the housing crisis

Despite this optimism for buyers from lenders, the recent statistics from the Home Builders Federation are alarming – a 24% decline in the number of homes being approved in the planning system in the first three months of 2023 compared to last year.

To achieve the Government’s target of building 300,000 new homes each year, we really need to see pro-development policies being introduced and quickly.

In our experience, local authorities appear keen to work with housebuilders to develop sensible Local Plans that support housing growth needs, the provision of affordable homes, and to help meet net zero strategies. Our Allison Partnerships division is dedicated to delivering high-quality affordable homes across our operating regions to help local authorities who have increasingly long waiting lists of people in housing need and simply can’t satisfy the demand.

Yet, delays in the National Planning Policy Framework are stalling Local Plans and preventing new development sites from coming forward at speed.

The Government needs to unlock this supply of land and make it quicker and easier to deliver the homes people need, in the right places.

The country faces a significant housing crisis that millions of people are paying the cost of.  At the root of that crisis is the slow pace of building and the hurdles SME builders face to get things done.

We need action now to help builders build, so that many more people can find a suitable home – owned or rented.  That’s why we are already supporting the HBF’s campaign – because building more homes, more quickly helps ordinary people find affordable places to live.

Smaller, regional housebuilders, like Allison Homes, are a critical part of this jigsaw – not only for building houses, but playing an active role in our local communities, investing in infrastructure, and supporting local economies through growth, employment, and training.

John also shared more of these thoughts in a recent article for Housing Today after the Bank of England announcement. You can read these thoughts here.