At the end of 2021, the Bank of England announced an increase in interest rates. This was the first interest rate rise in more than three years. The change saw interest rates move from 0.1% to 0.25%.
What will this mean for mortgage holders?
For households that hold a tracker mortgage, this increase is likely to see monthly mortgage payments rise by £15.
For households that hold a standard variable rate mortgage, this move is likely to see mortgage payments increase by £10 per month.
There are more than two million households in the UK with this style of mortgage.
Will prospective buyers be impacted?
Yes, if existing mortgage holders face paying more to service their mortgage each month, anyone looking to buy a home should prepare themselves to face higher mortgage payments each month.
What are industry experts saying?
Vanessa Hale, a well-known name in the property market spoke to the Property Industry Eye website, saying; “This rate rise may not be significant but it is a clear statement of intent. The rise has been a long time coming, and with inflation now at decade high levels, there really is little alternative. The rate rise has been priced in to mortgages, and with fixed mortgages making up around 80% of the current market, the housing sector is unlikely to be impacted too dramatically. The reality is that demand for housing continues to outstrip supply which will sustain prices for 2022. However, with the cost of living continuing to rise, this could have an impact on the housing market for the medium term.”
Eleanor Bateman, Policy Officer at Propertymark, commented: “The increase in base rate to 0.25% is a small and necessary step and one that most had anticipated for some time. Mortgage rates have been creeping up over the past few months, and while those on variable rates will see payments increase, the cost of borrowing remains low relative to historic levels. Though, traditionally, the winter months see a decline in activity, our Housing Market report shows sustained demand with average sales agreed maintained to the end of October.”
Eleanor Bateman continued by saying; “With indications that lifestyle factors are continuing to prompt many into making a move, we do not expect today’s announcement to have a significant, negative impact on the market. Continuing uncertainties over COVID-19 may, however, have more lasting effects, and we would urge the UK Government to consider the property industry’s significance in any forthcoming decisions on further tightening of pandemic-related measures.”
Bruce Burkitt, another known name in the property sector, said: “The rate rise announcement is no surprise; however, the timing is. I thought this would come in early in the new year if the current COVID spike increased over Christmas and business failed to pick up come January, so it shows how serious our current situation is becoming. That being said, this is still only a small incremental rise, so it’s impact won’t be felt too harshly.”
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