The Bank of England Hikes Base Rates To 4%
The Bank of England increased the base rates by 0.5 points to a 15-year high of 4%, and here is how the industry reacts.
Buyers, lenders, and other property market players have to take into account new base rates that hit 4%. This fact will likely add further pressure on UK households, but many specialists reveal different trends.
Industry Reacts To New Base Rates
Many specialists highlight the immediate effect of increased base rates on households with tracker mortgages. However, the rates of many SVRs are still below the fixed-rate products, so it is unlikely many homeowners will switch to new deals.
There is good news for those considering getting a fixed product, as many lenders were prepared for the latest base rate spike and calculated their offered mortgage rates accordingly. It means that fixed mortgage rates are set to continue their downward trend after significant peaks driven by the mini-budget.
Current demand levels are also above the pre-pandemic levels, suggesting that many buyers feel confident about their moves despite volatile market settings. Mortgage rates might rise again in 2023, but it's difficult to predict how they will impact the mortgage market.
Base Rates Impact
The changes in base rates are now less relevant for the housing market than the stability of the mortgage sector. Fixed rates have been slightly sliding down since the peaks in September 2022, improving buyers' confidence.
The mini-budget significantly affected the demand, prices, and mortgage rates, but it seems the market bounced back quickly as activity in January 2023 remained heated.
However, the resilience of home values and sales volumes will be stress-tested in the coming months when we see a lot of new transactions, while no fixed rates below 4% remain in circulation.
Generally, experts anticipate average home prices across the country to fall by 10% in the next two years as households readjust their budgets. This trend might be very different for the capital, especially the prime new build London market that proves to be resilient to economic challenges.
