- Housing Market
16 August 2024
The Downward Trend: How Declining Inflation Impacts Mortgage Rates and Benefits New Home Buyers
At Thomas Alexander Homes, we understand that purchasing a home is more than a decision – it’s a journey. A journey that requires having the right financial information at hand. The economic climate of the country plays an instrumental role in shaping the homebuyers’ decision, with factors like inflation rates and mortgage interest rates sitting at the centre of it.
With the recent dip in inflation to 4.6%[5%5E], potential homeowners might be wondering how this impacts them. In this blog, we explore the relation between inflation, mortgage rates, and the subsequent benefits on offer for those considering buying a new home.
Deflating Inflation and Mortgage Rates
Generally, there is an inverse relationship between inflation and mortgage rates. As inflation decreases, mortgage rates often follow suit. Let us unpack why. Lenders take the inflation rate into account when deciding on the interest to charge on loans, including mortgages. They do this to maintain the profitability of their loans over time against the purchasing power of money.
When inflation decreases, it can halt the fast-paced increase in mortgage rates, making loans relatively less expensive for borrowers. To put it simply, this means that as inflation goes down, mortgage rates can become more favourable for new home buyers.
The Benefit to New Home Buyers
The time has certainly not been better over the last few years for potential homebuyers to make their move. A lower mortgage rate means reducing the overall cost of homeownership over the term of your loan. You’re able to save more money in the long run, making your investment into a Thomas Alexander Home even more value-packed and cost-efficient.
Life Beyond the Purchase
Remember, buying a home isn’t merely about the purchase, but also about maintaining the lifestyle it enables. Lower mortgage rates means more room in your budget for enjoying life in your beautiful new home. This could translate into home improvements, furnishings, or even something as simple as the opportunities for creating precious memories with family and friends.
Making Your Move
At Thomas Alexander Homes, we are driven towards making quality, sustainable living a reality for our clients. With the help of insightful industry knowledge and a range of luxurious, sustainable homes on offer, we are here to guide you on your home-buying journey. As inflation tides change and potentially lower mortgage rates gleam on the horizon, there has never been a better time to invest in the high-end, energy-efficient home of your dreams.
Sources: Bank of England – UK Inflation Report