06-03-2025
Mortgage News
Mortgage Rate Reductions
Major lenders have continued to adjust their offerings, with some rates dipping below 4%. Nationwide Building Society, one of the UK’s largest lenders, implemented significant rate cuts, with some deals as low as 3.99% for existing and new customers, effective from late February.
Barclays followed suit, reducing rates by up to 0.48 percentage points, including a five-year fixed-rate Green Home mortgage at 3.96%. HSBC introduced a standout 3.98% five-year fixed deal, though access is restricted to premier customers with high income or savings.
Other lenders like First Direct and Santander have also been competitive, offering sub-4% rates, signalling a potential “price war” among lenders to attract borrowers.
Increase in Mortgage Lending
Data from the Bank of England, reported on March 3, showed net mortgage lending in January reached £4.21 billion, the highest since September 2022, up from £3.34 billion in December. This surge, exceeding expectations of £3.2 billion, suggests a rebound in housing market activity, possibly driven by lower mortgage rates, rising real wages, and buyers rushing to beat an April Stamp Duty deadline.
Market Dynamics and Competition
The trend of rate cuts reflects falling swap rates (a key factor in fixed-rate pricing), which have stabilized below 4%, and the Bank of England’s base rate reduction to 4.5% in February. Analysts note increased competition among lenders vying for market share, with expectations of further incremental reductions as funding costs ease. However, some caution that significant further drops may be limited unless market conditions shift dramatically.
Housing
Social Housing Push in Cumbria
On March 4, Lake District MP Tim Farron highlighted the affordability crisis in Cumbria, where house prices are around 20 times the average income. He called for councils to gain powers to build more social housing, addressing the gap between the 3,500+ empty properties and over 8,000 people on the housing waiting list.
UK Housing Market Resilience
Reports from Knight Frank (March 3) and Property Industry Eye (March 3) noted the UK housing market showing resilience despite challenges. Inflation rose to 3% in February, outpacing house price growth (which slowed to 3-3.9% annually per Halifax and Nationwide indices). Analysts suggest the Bank of England’s potential rate cuts could support homebuyers if inflation stays near the 2% target, though tax changes and rising costs loom as risks.
Leasehold Reform
On March 3, The Independent reported government plans to ban the sale of new leasehold flats, shifting to commonhold as the default tenure. This aims to give homeowners more control and end the “feudal” leasehold system, with a draft bill expected later in 2025. The move was broadly welcomed, though some urged caution in implementation.
London’s Affordable Housing Drop
The Standard (March 5) revealed an 88% year-on-year decline in new affordable home starts in London, signalling dire consequences for the housing crisis. Even initiatives like John Lewis’s plan to build rental homes (35% affordable) face viability challenges, reflecting broader development struggles.
Economy
US Tariffs Threaten UK Economy
Bank of England Governor Andrew Bailey warned on March 5 that new US tariffs under President Trump—25% on Canada and Mexico, 20% extra on China, and threats of 25% on EU imports—pose a “substantial” risk to the UK economy. These could raise inflation, squeeze consumer spending, and disrupt trade, even if the UK might dodge direct tariffs via a potential US-UK trade deal hinted at during PM Keir Starmer’s recent Washington visit.
Factory Job Cuts Accelerate
On March 3, reports highlighted UK factories slashing jobs at the fastest rate in nearly five years, driven by Chancellor Rachel Reeves’ budget, which raised payroll taxes. Weak demand at home and abroad, compounded by a £40 billion tax hike, has led to borrowing hitting £118.2 billion and tax revenues in January falling £5 billion short of forecasts, signalling economic stagnation.
Inflation and Growth Concerns
Inflation climbed to 3% in February, outpacing house price growth (3-3.9% annually), while the Bank of England halved its 2025 growth forecast. Some economists blame Reeves’ budget for stagnation, with supply chain issues and rising costs adding pressure. Analysts see potential relief if interest rates drop, but uncertainty lingers.
Employers Trim Forecasts
The UK employers’ group cut growth predictions this week, signalling slower hiring, wage growth, and business investment. This could push unemployment higher if job creation stalls, further dampening consumer spending and economic momentum.
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