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Have Bank of England rate hikes peaked?

Agents and property professionals have expressed hopes that rates have peaked after latest rise Iin the cost of borrowing.

The Bank of England yesterday hiked interest rates from 5% to 5.25%.

This marks the 14th consecutive increase in a row.


The last time the base rate hit 5.25% was in February 2008, 15 and a half years ago. 

However, this increase is smaller than the previous rise, giving some commentators hope that rates have peaked.

Richard Donnell, executive director of research at Zoopla, said: "Although the base rate has increased further today, it's not all doom and gloom for the housing market. 

“There are signs that mortgage rates are peaking and 87% of mortgages are on fixed rates. 

“For homeowners and would-be buyers who are impacted by mortgage rates, it's important to note that the impact is not uniform across the UK.”

He said higher mortgage rates hit harder in higher value markets in Southern England where a larger deposit and income are required to buy with a mortgage, adding: “In contrast, in the north of England and Scotland, house prices are still rising as the impact of higher mortgage rates is less pronounced. In certain areas in these regions, it's also still cheaper to buy than rent at 5.5% mortgage rates." 

Tom Bill, head of UK residential research at Knight Frank, added: “The rise was priced in and fixed-rate mortgage deals will be unaffected. 

“Tracker rates will rise but the growing popularity of these deals shows there is a belief that the bank rate is near its peak. It has been a bumpy ride back to normality for interest rates, with the previous government doing too much too quickly and the Bank of England arguably doing too little too late, but the last 14 years of ultra-low rates will increasingly be seen as the exception rather than the rule. 

“Some lenders are cutting rates and as inflation continues to fall, sentiment in the housing market will improve. That said, downwards pressure on prices and transaction volumes will continue into next year as more people roll off fixed-rate deals and while the market is not on its knees, demand will remain subdued through to the next election.”

Matt Thompson, head of sales at Chestertons, added that higher rates mean buyers are adjusting their budgets.

He added: “We expect the rate rise to have a particular impact on homeowners with a variable mortgage as well as overleveraged buy to let investors whose increased mortgage payments could result in their investment making limited profit or a loss. 

“Although there still is a vast number of buyers wanting to move as soon as possible, rising interest rates are forcing house hunters to be more cautious, review their financial situation and calculate a more conservative budget. Whilst this has recently resulted in fewer new buyers entering the market, we expect activity to pick up again once buyers have adjusted their criteria and lenders are bringing more products to the market again.”

Phillip Nelson, research officer for Propertymark, said: "An interest rate rise of only 0.25% has been widely anticipated since June's inflation figures. Seeing this come to pass is a good sign that we will soon see interest rates peak.

"Peaking rates will be a positive sign for many homeowners, and even lays out some hope that fixed mortgage rates will start to fall."

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    Far too early to say if UK interest rates are near their peak (in the US interest rates have risen recently, even though inflation is around 3% -much lower than here). The key point of yesterday's BOE report is that interest rates and therefore mortgage rate are likely to remain at today's levels for the medium-term. Not a good prospect for the UK's housing market.

  • Andrew Stanton PROPTECH-PR A Consultancy for Proptech Founders

    With variable rates at 7% for FTB's with small deposits, compared to 2% just 19-months ago, you can see why 900,000 completions likely in 2023, down from 1.25M last year and 1.45M the year before, cheap house finance equals lots of movers, expensive house finance means many can not afford to move. Another 500 points of increase likely, so 5.75% in the near term from our friends at the BoE.

  • Proper Estate Agent

    The economy is now like an oil tanker but with it’s rudder connected to the steering by elastic and sooner or later they will get slapped by the rudder and then panic reverse the steering.


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