Bank of England raises interest rates to 5%
Last week, the Bank of England raised interest rates for the 13th consecutive time. The Bank rate, which is set by the Monetary Policy Committee, increased to five percent from 4.5 percent.
The shock interest rate rise will push millions of homeowners into higher mortgage repayments.
Figures from UK Finance have revealed that 800,000 fixed mortgages will expire before the end of this year.
Homeowners who renew their mortgages will spend an average of £2,900 a year in additional interest rate payments, according to the think-tank Resolution Foundation.
However, the continued rise of interest rates isn’t just affecting mortgage repayments and loan costs but house prices too.
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According to Oxford Economics, house prices are expected to fall until the second half of 2025 with prices expected to drop by 11 percent compared to their 2022 peak.
With this in mind, David Hannah, chairman of the UK’s leading property tax experts, Cornerstone Group International, has explained what impact rising interest rates could have on the UK property market.
Mr Hannah explained that due to rising interest rates, property sales could slow down and house prices could decline.
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He explained: “Due to the decision from the Bank of England to raise interest rates to five percent, homeowners coming off fixed-rate deals and moving straight into a six percent mortgage are going to be unable to afford them.
“That’s going to lead to a load of repossessions and forced sales which is not good news. Fundamentally it’s going to shatter confidence in the market.
“Such an environment will lead to a slowdown in property sales, as well as a potential decline in property prices, impacting both existing homeowners and those aspiring to join the property ladder.”
The latest announcement could also have an impact on first-time buyers who may now be unable to get onto the housing ladder due to extortionate mortgage rates.
This could also have an impact on renters. Mr Hannah explained: “The rise will also have a knock-on effect on the rental market too – it has already been suffering from a lack of supply, and now, with a growing number of would-be buyers in need of a place to live, this is going to be exacerbated further.
“The result of this is that rental prices and competition will likely increase at a time when people are already struggling.”
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