Impact of Rising UK Mortgage Rates on Prospective Homebuyers
July 24th, 2023
The Bank of England’s frequent interest rate hikes due to inflationary pressures and global economic changes have led to a substantial increase in mortgage rates, significantly affecting prospective homebuyers. The implications of this surge in rates are wide-ranging, impacting borrowing costs and housing affordability across the housing market.
- Steep Rise in Mortgage Rates:
Fixed-rate mortgages have soared from approximately 2.4% in 2020 to around 6.6% as of July 2023. Consequently, the affordability of properties has been severely impacted as higher interest rates translate to increased monthly mortgage payments for buyers.
- Burden on Existing Homeowners:
Homeowners seeking to remortgage are facing the brunt of the rising rates, witnessing an average yearly increase of £2,900 in their mortgage payments. This has hit hardest for those who locked in fixed-rate mortgages during the 2020/2021 stamp duty holiday.
- Renters Feeling the Pinch:
The knock-on effect of rising interest rates is evident in the rental market. Landlords are passing on the cost to their tenants through increased rental rates.
- Potential Silver Lining for First-Time Buyers:
Despite the challenges, the surge in mortgage rates may offer a silver lining for first-time buyers. As the market adjusts to the impact of increased rates, it could lead to a potential fall in house prices. This could present an opportunity for first-time buyers to enter the market at more accessible price points.
