Even today having observed a decrease in interest rates this August, Guernsey has not seen a corresponding decrease in mortgage rates. Some of the country’s localized banks including Lloyds and Skipton have subsequently down-petitioned their rates and many residents still await this reprieve.
This is different from the experience in the UK where most of the banks and lenders immediately cut their mortgage rates immediately after the Bank of England base rate was slashed from 5.25% to 5%. This became the first rate cut since March 2020 when the state of the world changed quickly due to the Covid-19 pandemic, which provided some relief to the UK borrowers.
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Why is it that are Mortgage Rates not falling in Guernsey?
In the view of Pierre Blampied, the managing director of SPF Private Clients – a mortgage broker from Guernsey, the slow pace at which rates have been cut is mainly caused by the fact that banks are profit-motivated. He says this: “Banks exist to make money and therefore they will take their time. ” While this may be slightly closer to home as it is within the EU, the differences remain major enough to give Guernsey-based lenders less pressure in terms of time than their counterparts in the UK.
This factor concerns the cost of borrowing which affects the determination of mortgage by the money lenders and the banks. But to the Guernsey consumers, it is prudent to note that though fixed rates mortgages might be on the decline Blampied is quick to warn that these are not likely to be drastically low shortly. He underlines that Guernsey works in the “supply and demand market” and has fewer competitors compared to such markets as the UK.
“In the UK,” for instance, he says, “first mover to adjust rates downwards will attract a bulk of business among lenders. ” “But here, even if they delay lowering rates, it doesn’t have the same effect on us We are a small market, a market area the size of a small town in the UK. ”
Mortgage Rates: The right direction: what are the directions in which Guernsey is heading?
Some could paint a better picture like Nick Paluch of Savills Guernsey. He said that the island is ‘on the right track’ and that mortgage rates will come down in the long run. Still, as Paluch remarks, Guernsey requires lower mortgage rates for increasing the sales of properties – and, in particular, homes for first-time buyers.
Paluch adds that since the interest rate cut last month, there has been an increase in activity in the mid-range and upper end of the market. “If that is therefore, then the major victory is won in the market; however, we require more affordable rates for homeownership in the future. ”
Where Does Guernsey’s Mortgage Market Stand and How is it Different from the UK?
An interview with a representative of the Association of Guernsey Banks helped to explain why there is such a difference in mortgage rates between Guernsey and the UK. He says that the determination of mortgage rates is a “commercial decision” for every individual bank. For that matter, Guernsey has its unique market in the following ways;
First of all, it is necessary to mention that the average house prices in Guernsey are much higher and the co-efficient of property prices to household incomes is also higher in comparison with the United Kingdom. Furthermore, the operating cost in Guernsey is high and it has a different regulatory system which impacts the funding structure and the total cost of borrowing in banks on the island.
Moreover, the procedures of the mortgage in Guernsey are more time-consuming and complicated as they include more stringent local conveyancing compared to those in the UK; all the above factors also affect the mortgage rates.
As far as Mortgage rates are concerned, will they ever reach Guernsey?
There are still high expectations that in the future the mortgage rates in Guernsey are going to go down, but the fact remains that it is a minuscule market, with high costs and little competition for the larger companies thereby leading to a process that is markedly slower than in the UK. For now, first-time buyers and any buyer who wishes to enter the property market may have to wait a little longer for a massive reduction in the interest rates to occur.
Are You Still Expecting for Best Or the Cheapest Mortgage Rates to be Available in Guernsey? Here’s Some Consideration You May Want to Be Aware Of
The future appears bright; however, doing business in Guernsey requires perseverance. It is suggested that one regularly monitors the local banks and general trends so as to notice some change in the rate cuts.
In this article, we brought you the latest trends of the Guernsey property market as well as developments in the financial sector; we will continue to post the latest updates on adityasinghtharran.com!
