8% USA Mortgage Rates What Now For UK?

We have seen many stories over the weekend highlighting that the ‘bottom’ has fallen out of the US property market.

A report from major US ‘2^nd tier’ lender 'Freddie Mac' (The Federal Home Loan Mortgage Corporation is a publicly traded, government-sponsored financial group set up in 1970 to expand the secondary market for mortgages in the US).  In short, to buy up ‘mortgage books’ of lenders that was to sell their mortgage client book on to create continued bank liquidity for sat even offer even more loans/mortgages.

This allows us to take a ‘barometer’ reading for mortgage market sentiment.  Currently:

• Average 30-year rates sit at 7.50% pa and regularly push up to just below 8% pa..
• Average 15-year mortgage rates sit at 6.81% pa.

30-year rates were at 7.90% pa last week ahead of the central interest rate freezes by the Federal Reserve (Fed) and the Bank of England (BoE) with the European Central Bank (ECB) holding rates the week before.

Comment

Demand for mortgages has disappeared in the US with mortgage applications at their lowest levels since the mid 1990s.  Confidence is not there, and we suspect 2024 will be a tough year for property not just in the US but also in the UK and Europe.

The UK property market is different to the US, but we are mindful of both the Fed and the BoE have suggested that they may increase rates again after the current pause.  Banking groups need to make money and without borrowing they do not make money.

We suggest this will be a fine balance between central bank rates, lenders wanting to be competitive and offer affordable mortgages to not ‘choke off’ demand and government intervention with assistance may be for 1^st time buyers or stamp duty holidays. 

Will rates hit 8% in the UK.  We suggest this is going to be tight and we should all prepare for higher rates as many borrowers’ mortgage deals end next year and the need to remortgage (at higher rates) increases.