The Research Director of Zoopla gave his opinion on how yesterday’s increase in interest rates would affect the Uk housing market.

1. Interest Rates Are Rising, But Not As Much As Expected:

The Bank of England has raised the base interest rate to 5.25% to tackle inflation. Initially, people thought rates might go even higher, but now they expect just one more small increase.

2. Fixed Mortgage Rates Near Peak:

Most of the mortgages people get these days are fixed rate, meaning the interest rate doesn’t change during a set period. Banks think these rates are almost as high as they’ll go, and some are starting to lower them a bit. By autumn, they might fall below 5%.

3. How Different Mortgages Will Be Affected:

• 87% of mortgage holders on fixed rates: They won’t feel any immediate change.
• 15% on fixed rates ending in 2023: They will need to refinance, which could mean paying £200-£250 more per month.
• 13% on variable rates: They’ll see their monthly repayments increase right away.

4. More People Paying Down Mortgages:

Some households are using savings to pay off their mortgage debt faster, as this has become more attractive compared to keeping money in a savings account.

5. Market Impact of Higher Mortgage Rates:

• New buyers decrease: There are 18% fewer new buyers due to the rise in mortgage rates.
• Prices falling in southern England: Higher mortgage rates mean that in areas where houses are more expensive, people can’t afford to buy as easily, causing prices to fall.
• Prices rising in the north: In the north of England and Scotland, where houses are cheaper, the rise in mortgage rates hasn’t had as much of an effect, and prices are still going up.

6. Buying Vs Renting:

It might now be cheaper to buy than rent in the north of England and Scotland. But in southern England, first-time buyers find it more challenging, affecting the demand and keeping prices down.

7. UK House Prices Prediction:

Experts predict that UK house prices will fall 5% over 2023, but still, they’ll remain 15% higher than before the pandemic. They don’t see a quick recovery and expect very low house price growth into 2025.

8. What Does This Mean for Prospective Buyers?

If you’re thinking about buying a house, understanding these trends can help you make an informed decision. Interest rates may stabilize soon, and mortgage rates might even start to fall. But the picture varies across the country, with the north and south experiencing different pressures.

9. For Sellers:

Those who are considering selling their homes should carefully set their price, considering the above factors, if they wish to make a move successfully.

In summary, the increase in interest rates and its impact on the housing market is complex, but the situation seems to be stabilizing. The main message for prospective investors or homeowners is to carefully consider their location and the type of mortgage that will best suit their needs, and to keep an eye on the evolving economic landscape.