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June 2024

May has been an interesting month, the base rate remained at 5.25%, inflation dropped to just above the 2% target and yet interest rates have remained pretty stagnant. 

In this months update, we'll be giving a overview of the UK mortgage market. 
We'll also be talking about whether and how benefit income can be factored into affordability. 

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It has been a particularly unsettled time for the UK property market over the last couple of years, we haven't really seen any let up. Because of this, it's surprising that there hasn't been any proposals by government to boost the property market, or to aid First Time Buyers.  

I've also noticed a very slow new build market, we no longer have help to buy. There is a deposit unlock scheme which will allow a 5% deposit for new build properties. Aside from this, there haven't been any new incentives for buyers of new build properties. 

Is this simply a sign that this sticky time for the property market is a needed adjustment and that there will be no quick fixes?

This month we really haven't seen any movement. 

On May 9th the Bank of England met and decided to keep the base rate at 5.25%. It wasn't unexpected, inflation hadn't reduced enough to warrant a reduction. There was a really positive feeling after that meeting, along with feedback from members of the committee, that we would likely see a reduction to the base rate at the next meeting in June.  

This feeling was because a dramatic reduction in inflation was expected, with a target of 2.1% set for April. 

Well, what we saw was that inflation did reduce drastically to 2.3%. This was incredible to see, finally we are in the 2's. However, this reduction fell just short of the 2.3% target which changed Junes outlook and made it a lot less likely that the base rate will reduce before August. 

The market has reacted to the changes by not really reacting at all, interest rates haven't really changed too much and are unlikely to change until we see some indication that the base rate will lower. 

It really is a waiting game for now.

Mortgage Rates Today

Can I Use Benefits Towards My Mortgage Affordability?

The answer to this question is complex, and isn't the same for all lenders.  

Working with the whole of market gives me great insight into the differences in attitude towards benefit income and what a different lenders will and will not accept. 

Most, if not all lenders will accept forms of benefit income towards affordability. They may accept only certain forms, or for certain periods of time. 

For example, HSBC will accept child related benefits towards affordability but only if the child related benefits will endure through the entire term of the mortgage, if not they will not be taken into account at all. 

Some lenders will accept a percentage of certain benefit income towards your affordability. 

Leeds Building Society will accept certain benefit incomes at 100%, however, your employed income must make up at least 50% of your total income. 

The rules are varied depending on the lender, the type of benefit income and the length of time the income will be received. 

So, the answer to this question is really, to dig into the research, to get the right answer for you, this is one of those criteria which will be different for each person. This is where a good broker can help.  

Jen Boulter

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