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What Further UK Interest Rate Rises Mean for the Housing Market

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On 23rd March 2023, the Bank of England raised interest rates from 4% to 4.25%

With the recent interest rate rise in the UK still fresh in our minds, many are left wondering what further UK interest rate rises could mean for the housing market. For decades, the property market has been a cornerstone of wealth and stability for many families. However, as the Bank of England considers further rate increases to combat inflation and support the economy, it’s crucial to understand the potential implications of these changes on homeowners and prospective buyers.

Let’s look at the potential consequences of additional interest rate rises on the UK housing market and what we can do to safeguard our financial well-being.

Potential impact on homeowners

Increased mortgage costs

Further rate increases would lead to higher mortgage interest rates, resulting in increased monthly repayments for those on variable rates or tracker mortgages. This could put additional financial pressure on households, making it difficult for some to meet their mortgage obligations.

If you fall behind on your mortgage payments, you are in mortgage arrears.

Being in mortgage arrears is serious. If you don’t make up the payments or come to an agreement with your lender then your home could be repossessed. Speak to your lender as soon as possible if you feel this could apply to you.

Slowing down house price growth

A rise in interest rates might cool the housing market by making borrowing more expensive, thereby reducing demand. This could lead to a slowdown in house price growth, which may be concerning for homeowners who rely on their property as a long-term investment.

Equity release and remortgaging challenges

Higher interest rates could also impact the equity release and remortgage markets. Homeowners looking to release equity from their homes or remortgage to a better deal may find it more challenging and costly in a higher interest rate environment.

What about first-time buyers?

One of the most significant consequences of increasing interest rates is the reduction in affordability for first-time buyers.

Higher rates mean increased borrowing costs, which translate to higher mortgage repayments. As a result, some first-time buyers may find themselves priced out of the market or forced to compromise on their dream home.

Carefully consider your budget and how in the future, it could be impacted by future rate increases.

Always speak to a mortgage adviser who will be able to advise you based on your circumstances.

Mortgage Quotes

Always remember that your home may be repossessed if you do not keep up repayments on your mortgage.

Lending criteria

Future interest rate rises might force lenders to tighten their lending criteria in response. This would make it more challenging for first-time buyers to secure a mortgage. It could also mean higher deposit requirements, stricter income assessments, or additional financial checks.

If you’re a prospective first-time buyer you must be prepared. Have a good credit report and be prepared to provide proof of your financial situation. This can help improve your chances of mortgage approval.

Check Your Credit Score

Slowing housing market

While higher interest rates can dampen demand for property, this may not necessarily translate into lower house prices. Housing supply shortages and regional variations can still drive up prices, making it difficult for first-time buyers to find affordable homes.

However, a slower housing market could potentially provide some negotiation opportunities for determined first-time buyers.

What to do? 

Future interest rate rises in the UK will have significant implications for both homeowners and homebuyers.

We will all need to adapt to changing financial conditions by carefully assessing our budgets and exploring alternative mortgage options.

Always seek professional mortgage advice to navigate this evolving landscape.

Find Your Mortgage

Always remember that your home may be repossessed if you do not keep up repayments on your mortgage.

Last Updated: March 24th, 2023

Phil Spencer

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