Mini budget: What does it mean for homeowners?

BY Ned Browne

17th Oct 2022 Property

Mini budget: What does it mean for homeowners?

With the mini budget affecting many areas, homeowners may find themselves wondering about the mortgage market specifically. Ned Browne shares some insights on what to expect

Mortgage mayhem 

Ever since the fabled mini budget, the mortgage market has experienced turbulence not seen since the Global Financial Crisis of 2008. At the time of writing, the Bank of England’s base rate, at 2.25 per cent, is low in historical terms. However, it’s expected to rise sharply to combat current high inflation rates. This, combined with the market’s scepticism of the government's fiscal policy, spooked the markets.  

"The mortgage market has experienced turbulence not seen since the Global Financial Crisis of 2008"

The cheapest two-year fixed rate deal is now over six per cent. To put this in context, in 2021 it was possible to fix for two years for less than one per cent. Crazy times! 

The impact on homeowners 

As with all things, it depends on who you are. One quarter of people with a mortgage are on variable rates, so their monthly payments will be rising in line with the base rate; the base rate has already gone up, and further rises are inevitable.

Mortgage rates

Your mortgage rate will determine how the mini budget affects you

Those with fixed rate mortgages will be protected, but only for as long as their current deal lasts. Over the next twelve months, it’s reckoned that almost a quarter of those will find themselves at the mercy of the mortgage market, which is already looking ugly.   

Of course, many people own their homes without mortgages. If that’s you, you’re in an enviable position.   

Will property prices fall? 

The rug has been pulled from under the feet of first-time buyers. Even for those who have diligently saved for a deposit and have an excellent credit rating, being able to afford the monthly mortgage repayments may now seem like a pipe dream.  


Home ownership may feel like a pipe dream for many

The same goes for investors. Many landlords make razor-thin margins and, due to tax changes, can no longer offset mortgage interest payments against profits. This means that demand from this sector will dry up too. Plus, many landlords may be forced to sell.  

These factors combined suggest we’re heading for choppy waters.  

Lessons from history 

The last time there was a spike in interest rates, it caused long-term pain. Between 1990 and 1995, approximately 345,000 properties were repossessed. That’s a little under 3 per cent of all homeowners. The property market flatlined for more than six years, as these repossessed properties flooded the market. And this time it could be worse—many people have much larger mortgages and fuel costs are higher too.  

New opportunities 

Most households are going to feel the pinch for many months to come. But the markets will settle and mortgage rates will fall. No one knows when. History has taught us, though, that those who hang on will, eventually, prevail.

"Most households are going to feel the pinch for many months to come"

In 1990, interest rates hit 15 per cent. By 1995, they had dropped to five per cent. In the words of Shannon L Alder, "There is always a storm. There is always rain. Some experience it. Some live through it. And others are made from it." 

Be empathetic 

The next few months or years are going to be tough. But remember, if you’re not suffering, someone else is: your neighbours, your friends, your relatives. Be kind and be empathetic. And please don’t brag that you fixed your mortgage last year at a ridiculously low rate! 

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