Last week, the Bank of England raised interest rates for the 13th time in a row. The Bank rate, set by the Monetary Policy Committee, increased to five percent from 4.5 percent.
The shock interest rate hike 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.
According to the think tank Solutions Foundation, homeowners renewing their mortgages face an average of £2,900 a year in extra interest rate payments.
However, the continued rise in interest rates is not only affecting mortgage repayments and borrowing costs but also house prices.
According to Oxford Economics, house prices are expected to fall until the second half of 2025 and prices are expected to fall 11 percent compared to their peak in 2022.
With this in mind, David Hannah, chairman of the UK’s leading property tax experts, Cornerstone Group International, 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 fall.
He explained: “Because of the Bank of England’s decision to raise interest rates to five per cent, homeowners exiting fixed rate deals and moving straight into a six per cent mortgage will be unable to afford them.
“That will lead to a lot of repossessions and forced sales, which is not good news. Basically it’s going to break confidence in the market.
“Such an environment will lead to a slowdown in property sales, as well as a possible reduction in property prices, and will affect existing homeowners and those looking to get on the property ladder.”
The latest announcement could also affect first-time buyers who may now be able to get on the housing ladder due to extortionate mortgage rates.
This may also affect renters. Mr Hannah explained: “The rise will also have a knock-on effect on the rental market – it’s already suffering from a lack of supply, and now, with an increasing number of potential buyers needing a place. alive, this will be even worse.
“The result is that rental prices and competition are likely to increase at a time when people are already struggling.”
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