How will the latest 0.25% Bank Rate rise impact the UK property market?

The Bank of England has increased the Bank Rate to 4.5%.

The Bank Rate influences all other interest rates in the UK. Inflation is currently at high and the Bank of England needs to try to meet an inflation target of 2% set by the government.

Therefore, they will increase the Bank Rate when they want to soften demand, encouraging people to save money. This should slow the price inflation.

Will this affect the mortgage rate?

The consecutive rises in the rates since 2021 had a knock-on effect of mortgage rates to rise quickly to over 6% at the end of 2022, but since then they have fallen to the 4-5% range with little change. This is because Lenders have already priced in the further anticipated rate rises which means we expect mortgage rates to remain within this range over the rest of the year.

Also, with the cost-of-living rises and therefore fewer buyers in the market, lenders need to keep their rates competitive to attract new clients.

If you already have a mortgage on fixed rates, you will feel no immediate impact from a change in the Bank Rate.

Are house prices expected to drop further?

Predictions for house prices had also already priced in rate hikes so there is little change predicted with the new Bank Rate rise.

The initial news on inflation and rising interest rates last year already had a softening effect on the market and the market is predicted to remain steady by the end of 2023.

If suddenly the economy collapsed at a high rate and unemployment increased, then prices would fall.

If you are thinking of buying, the attractive lower prices and the settled Mortgage rates should give you the incentive to go ahead.

As long as it’s the right property for you and you’ve considered your options, trying to predict property market trend timings is a big challenge and often an opportunity lost.

Will property prices rise faster inside or out of London?

Prices outside of London will increase at a faster rate than in London in the coming year because places like Birmingham and Manchester are holding up best. There is stronger demand from buyers in these areas along with a lot of regeneration going on in the cities, which gives rise to stronger property price growth.

Please contact us for a discussion on the market trends and where to invest in this climate.