Home Buying House prices keep rising while buyers are warned to beware of super-low...

House prices keep rising while buyers are warned to beware of super-low mortgage rates

house prices 2021

Almost 20 days into July, and 20 days since the end of the stamp duty holiday, house prices keep rising.

It was the belief of many industry experts that the end of the stamp duty holiday would result in a significant slump in demand for the UK housing market – no longer able to benefit from a tax break of up to £15,000, people will be less eager to buy. This, however, has not come to fruition. 

Instead, house prices have kept rising. Rightmove has called the situation ‘frenzied’ as prices increased a further 0.7% between mid-June and mid-July, bringing the total growth for the past 6 months up to 6.7%. Rightmove says the main reason for this continued price surge is a drastic shortage of properties.

Mortgage too good to be true?

With prices still rising, many would still argue that today’s housing market is the most buyer-friendly we have seen in years, if not decades. This argument is based largely on the fact that mortgage providers have slashed their rates to lows that many of us have nerve seen.

These ultra-low mortgage rates, in theory, make it easier and more affordable to buy a home, but today a new warning has been issued, recommending that buyers do not get drawn in by super-low rates.

The falling rates started in 2020 when many providers introduced sub-1% rates for the first time in many years. HSBC, for example, launched a 0.94% rate mortgage. 

However, new reporting from The Guardian has revealed that opting for the lowest rate might not always be the best idea for homebuyers because low rates often come with additional fees, fees that negate the many of the benefits of a low rate. 

HSBC also offers a five-year fixed rate of 1.04% – available to its Premier account customers only – with a fee of £1,499.

The problem arises when people choose not to pay the fee and instead choose to add it to their overall loan. When this happens, they end up paying interest on the loan, thus increasing the amount they pay over time to such an extent that it negates the positive elements of a low interest rate.

We recommend you read the Guardian’s research closely before buying a mortgage – there is a lot to learn, and a lot to look out for.

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