We’re turning the spotlight onto a hot topic in the UK property market – The rising mortgage and interest rates, and what it means for potential buyers and existing homeowners alike. Worried about rising rates? Lock in and compare mortgages with homemove here.

In an unprecedented move, the Bank of England has decided to up the Base Rate 13 times since December 2021. As of now, it stands at a robust 5%, reaching a height unseen in the last 15 years. The consistent hike in rates has primarily been triggered by persistent inflation figures that surpassed initial forecasts.

Consequently, this has steered mortgage rates upwards, causing ripples in the property market. Estate agents are witnessing a pause in activities as potential home-movers take a step back to reassess the implications of these escalated costs on their financial plans.

These climbing costs are gradually chipping away at the affordability factor for prospective home-buyers. In response, many sellers have had to recalibrate their price expectations. This dynamic is reflected in the recent dip in the average asking price for a home in Great Britain. This month, it experienced a slight reduction of 0.2% (equivalent to -£905), settling at £371,907. Notably, this is a tad below the 0% norm typically observed around this time of year and comes on the heels of a £82 decline in June.

Despite the odds, house prices have demonstrated an unexpected degree of resilience in the first half of the year. Current figures reveal a 2.6% increase since January. The thirst for property among home-buyers remains strong, surpassing the demand seen in the comparatively normal market conditions of 2019. However, the escalation in rates has inevitably taken a toll on the volume of home sales finalised in June.

The Big Picture: The Impact of Rising Mortgage Rates on the UK Property Market

The UK property market has always been an intriguing melting pot of activity. With its trends oscillating between periods of explosive growth to quieter spells, it’s worth noting that buyers and sellers’ sentiment is heavily swayed by several factors. Chiefly among them? Mortgage and interest rates.

Currently, we’re locked in an interesting era where we see a combination of high demand, increased property prices but steadily creeping interest and mortgage rates. The proof is in the pudding, or in this case, the house prices. According to Land Registry data, the average UK house price stands at a whopping £256,000, a significant increase from last year.

The Real Impact of Rising Mortgage Rates in the UK

This is where things get interesting. Rising mortgage and interest rates pose an intricate question – will they douse the property market’s fiery demand or will it merely shift the landscape?

On one hand, they make it more expensive to borrow, softening the demand and potentially stabilising house prices. However, for first-time buyers with dreams of their own home, this scenario may push them towards a financial stumbling block. It’s a reality we’re beginning to see manifest – a recent survey found that 31% of potential first-time buyers have been priced out of the market due to these rising costs.

Historical Traces: A Look Back at the Past Trends

History can be the best teacher, and it’s no different with the property market. Historically, periods of rising interest and mortgage rates have correlated with a slowdown in property price growth. These periods also often coincide with an economic boom phase when incomes are generally rising, thus somewhat negating the rate effect. However, every economic scenario is unique, so while the past can guide us, it isn’t a definitive crystal ball.

Consequences for Home Buyers and Sellers

As we look at the implications of rising rates on buyers and sellers, it’s a mixed bag. On the upside – sellers could potentially benefit from this scenario. It’s simple economics – lower supply, combined with high demand, can only drive prices one way – up!

For buyers, especially those on a tight budget or first-time entrants, the uphill battle for homeownership becomes increasingly steep. However, as the old adage goes – ‘Where there’s a challenge, there’s an opportunity.’ Despite the rising costs, there are various real estate strategies that could make your dream of homeownership a reality.

Expert Opinions and Analysis

The experts are chiming in too. Many predict that while rising mortgage and interest rates could bask the UK property market in a temporary slowdown, the long-term impact is far more optimistic. With low unemployment rates and gradually recovering incomes, affordability levels can still be maintained, while a certain degree of price stability could be beneficial.

Wrapping it Up

To summarise, yes, rising mortgage and interest rates will undeniably shape the UK property market. They may provide temporary headwinds, but the inherent robustness of the market, aided by broader economic indicators, might potentially create an environment that maintains affordability and stability.

So, whether you’re buying, selling or just spectating, remember that the property market is a game of patience and prudence. And as always, we’d love to hear your thoughts. Do you think rising rates will impact your property decisions?

Original Article: https://www.rightmove.co.uk/news/articles/property-news/mortgage-interest-rates-house-prices-july-2023/