Invest & Fund forecasts higher house prices despite mortgage rate hikes
Invest & Fund has predicted that residential house prices in the UK will rise despite higher borrowing costs.
The peer-to-peer property lending platform noted the Bank of England’s rate-hiking agenda this year, in a bid to tame high inflation, and its consequences on the property market.
“It’s a popular misconception that the central rate is tied to pricing when it’s one of many factors, for instance when the prices of mortgage-backed securities drop, mortgage providers tend to increase interest rates,” Invest & Fund said.
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In this instance, it said that high inflation devaluing the pound and dollar has reduced investor demand for mortgage-backed securities globally to a 23-year low, and mortgage rates are increasing as a result, to try and increase the attractiveness of the returns.
“Regarding asset pricing, we can be more optimistic in the residential housing market, and even dare I say it…optimistic!” Invest & Fund said in a blog post on its website.
“We made our judgement calls last year, and we still stand by what we said; the critical data will be the Office for National Statistics report due out on 21 June, which we will cover later in the month.”
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The lender cited a recent article in The Economist which said that house prices globally have started to recover, with Australia, America and the Eurozone all seeing rising values.
“[This] may be a forward indicator of how our market will react eventually, certainly if our thesis is correct that despite mortgage market issues, the levels of private wealth on the demand side will bid up a market plagued by multi-generational supply issues,” Invest & Fund added. “It’s important to state here we are talking about a minor retracement to temper expectations, as opposed to the much media-speculated ‘cliff edge’ price scenario.”
With the cost of borrowing looking likely to increase, Invest & Fund said it is offering both standard and capped rate product lines to counter that, which allows the firm to lock in costs.
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