Only 6.8m homes in England now have mortgages, just 28 per cent of the overall market and about two per cent down from the level five years ago.
However, inflation is expected to surpass 7.0 per cent this year, and the widespread uncertainty as to the effect of the war in Ukraine, add to a pessimistic mood music surrounding the broader economy - and with it, buyer confidence in the housing market.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "The rise in interest rates is not unexpected bearing in mind it is one of the few tools the [Bank of England] has in its box for addressing inflation. However, the increase is likely to be lower than it may have originally preferred as it is likely to be keeping an eye on the impact on the economy bearing in mind events in Ukraine and the consequences for energy prices.
"The housing market has been a little quieter this year in response to recent events and is unlikely to be unduly compromised by the interest rate change considering only around a third of homes rely on mortgage funding, while many others are on fixed-rate deals. Inflation rising to seven per cent and the prospect of further interest rate increases will bear more heavily on confidence to take on additional debt and will help keep prices in check after their significant uplift last year."
Vanessa Hale, head of residential research & insights at Strutt & Parker comments: “At the moment there’s such a huge demand for housing, the incremental interest rate rise is likely to have little impact in the short term on house price forecasts. Diverse packages previously offered by lenders have decreased in number with less choice now available for borrowers, but this is unlikely to have a dampening effect on a market still dominated by a disparity between supply and demand.
“The increase sits in line with expected rate rises for 2022, and in the short-term is not a surprise. Within the mainstream housing market, econometric measurements such as employment figures and a further loosening of COVID-19 restrictions point towards a robust spring market. However, interest rate increases and the increasing costs of living are both metrics that we will continue to closely monitor looking at 2022 more broadly.”
And Jason Tebb, chief executive officer of OnTheMarket, adds: “We don’t expect it to quash the considerable buyer and seller sentiment in the housing market. Even with another quarter-point rise, interest rates remain low. The housing market is undeniably more stable than the hectic scenes witnessed last year but even as more stock becomes available, it’s not keeping pace with pent-up demand. New listings aren’t hanging around for long, with 61 per cent of properties Sold Subject to Contract within 30 days of first being advertised for sale in February, according to our latest OnTheMarket Property Sentiment Index.
"The housing market is adjusting to a ‘new normal’, distinct from the pre-pandemic market; an elevated, faster-paced version where a large number of highly motivated buyers are keen to move quickly and eager to compete with other likeminded buyers for the small number of available properties. Modest increments in interest rates are unlikely to result in a slamming on of the brakes as buyers realise that if they aren’t organised and prepared to be decisive, they risk missing out in this highly competitive market.”