“A 0.75% rate hike will send shockwaves through the housing market” – brokers on this week’s rate decision

This week, many are expecting the Bank of England to hike interest rates by 0.75% to fight inflation. In response, ten brokers were asked what this would mean for borrowers and the real estate market in general.

Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com: “A 0.75% rate hike will send shockwaves through the housing market. Yes, interest rates will still be low compared to their historical averages, but a large number of homeowners and buyers have never known interest rates this high. Factor in the impact of skyrocketing inflation and an economy teetering on the brink, and you have all the ingredients for a serious slowdown in transaction levels as people buckle up for a turbulent 12 months. It’s no surprise that a significant number of people on our platform choose to pay an early redemption fee to secure themselves before prices continue to rise. In the current real estate market, more people than ever are playing with percentages.”

Anil Mistry, director of a Leicester based broker, RNR Mortgage Solutions: “Younger borrowers aged 35 and under will feel the impact of rising interest rates the most, as many of them have never experienced such rate increases and the base rate will rise to this level. The global financial crisis has created an artificial interest rate environment that has lasted for almost a decade and a half, and we may be exiting it now. Many borrowers and homeowners are brought back down to earth in one fell swoop. Borrowers who may have fixed interest rates of 2% and below in recent years can now expect fixed income products to be in the high threes or even start with a four. Add in the increased cost of living and people’s disposable income is seriously affected. It is therefore important that if your current product expires in the next six months, you speak to your mortgage broker as soon as possible to have your circumstances reviewed and a new rate secured before there are any further rate hikes from the Bank of England. ”

Andrew Montlake, managing director of the UK mortgage broker, Coreco: “There’s no doubt that a 0.75% rate hike will make many potential buyers think twice, either about the value of the property they’re looking to buy or whether they’re ready to buy outright now. While interest rates will still be low by historical standards, many people who have only owned Post-Global Financial Crisis will start to feel very exposed. Some wannabe upsizers might shut down tools and choose to sit still for now. For first-time buyers, the psychological impact of even a 0.75% rate hike should be less pronounced, as their alternative is the rental market, where prices are off-base. Even if interest rates rise to 2.5% and above, it will still be cheaper for many to own than to rent. There is talk that prices will fall if interest rates rise, but I think this is unlikely unless the economy enters a deep and protracted recession. It is more likely that the price growth rate will fall and maybe even stagnate in the coming year. As always, the lack of supply will act like a glass floor under the real estate market.”

Emma Jones, managing director of the Frodsham-based broker, If the bank says no: Another rate hike this week is likely to discourage many people from hiking unless they really have to. For many, the prospect of potentially much higher mortgage payments and heating bills will put a halt to climbing the ladder. Further rate hikes should lead to more borrowing for home renovations and people starting to clean up their finances to reduce their monthly expenses. However, home demand is still as strong as ever, so even with a 0.75% rise in interest rates, we certainly don’t expect the housing market to come to a complete standstill. There is still a shortage of housing, so a sudden drop in prices is unlikely. We’ve seen a handful of lenders already raise interest rates in preparation for Thursday’s announcement, but we can expect more last-minute product withdrawals until then. I’d like to think that if possible, people would extend their mortgage terms to manage payments before trying to rush sell their homes and potentially lose money. There is no doubt that many people are not sufficiently prepared for the new interest rate era that we are entering. Of concern to renters is that a rise in interest rates could result in landlords raising rents to meet rising mortgage costs.”

Samuel Mather-Holgate of the Swindon-based consultancy, Finances of Mather & Murray: “A perfect storm is brewing in the housing market and the expected rate hike later this week will reinforce the low pressure front that is moving in. Add to that the cost of living crisis and the struggling economy, as last week’s poor retail sales data showed, and there’s every chance property transactions will fall sharply in the coming months as people shut the hatches. A growing number of people will be concerned about their job security, which means they won’t be making big decisions in the short term. Most lenders have priced in some of the expected rate hike, but if it’s 75 basis points, I would expect lenders to keep raising rates and fairly quickly. However, forced sales should not be a major problem. After the 2008 crisis, lenders set strict affordability criteria to ensure that customers could cope with rising interest rates and that, although rising, interest rates are still historically low. The new energy price cap will also ensure that many households are not burdened to the limit.”

Rob Peters, director of Altrincham-based Simple quick mortgage: “Borrowers coming out of fixed-rate mortgage businesses are seriously unprepared for the full 240-volt interest rate shock they are about to receive. Increased mortgage costs combined with higher commodity and energy prices will undoubtedly mean that heavily leveraged borrowers suffer the most. Some will have to downsize, buyers’ appetites will wane, and many aspiring buyers will have to put their new home purchases on hold. But even then, people’s basic need for housing will remain, so that the real estate market will not get out of hand.”

Lewis Shaw, founder of Mansfield Shaw Financial Services: “The Bank of England is damned if it does and damned if it doesn’t. If they fail to contain inflation, politicians will argue that they are failing in their mandate to keep inflation low and stable. However, an increase in interest rates will further exacerbate the cost of living crisis as it will inevitably push up mortgage rates and reduce people’s disposable income. Over the past two weeks we have seen many lenders raise rates in preparation for further rate hikes that are likely to continue for the foreseeable future. Tens of thousands of people with mortgages are hit by an interest rate shock when they restructure their debt. If the Bank of England raises the base rate by 0.75% to 2.5%, most of my clients will trade below the base rate. By the time they come to renewal, they will face increases on a scale not seen in over a decade. This will likely result in some people reducing their size and others falling into arrears. Ultimately, it will dampen demand. Many people will say that interest rates were much higher and they faced worse; However, when interest rates were much higher, people didn’t have to borrow nine times their salary to buy a home.”

Imran Hussain, Director in Nottingham Harmony financial services: People are beginning to realize how low interest rates have been over the past decade, and those who have invested blindly and may have borrowed too much are facing serious financial problems. Another rate hike this week could well cause people who have been considering a possible hike to put their plans on hold, but one thing won’t deter serious first-time buyers or investors as there is an opportunity in every market. Ironically, since most people now know what their energy bills will be for the next 24 months, the confidence I have in the conversations I have with customers is stronger than it has been for the past three months. Up until about a fortnight ago, energy bills were an unknown and the ending of that uncertainty has boosted confidence. I see lenders reacting quickly regardless of the outcome of the Bank of England’s decision. We should brace for a spate of very short-term rate changes later this week and early next.”

Ross McMillan, Glasgow based company owner Blue Fish Mortgage Solutions: “With interest rates rising, people who are nearing the end of their initial 2-, 3- or 5-year fixed rates are the biggest concern. In many cases, these first deals are made at rates well below 2%, but people will find themselves being switched to a new rate more than double that. In practice, for every £100,000, this probably equates to an average increase in monthly payments of around £150. This significant increase, along with the general cost of living crisis, is now reaching a point where some people may need to start thinking about the profitability of maintaining their mortgage and whether selling or downsizing needs to be seriously considered. While the current rate hikes will no doubt cause some potential buyers to pause and think a little longer before going ahead with their plans, I don’t see property values ​​being drastically affected by the rise in mortgage rates given the low supply.”

Mark Robinson, Managing Director of the Southampton-based company Albion Forest Mortgages: “Interest rates on mortgages and possibly equity release products will undoubtedly rise again, but people will find a way to deal with it. Even though people are surprised when I tell them their new interest rate starts at 4 or even 5, they accept it. People need a roof over their heads and rental prices are increasing at the same rate or even more in some areas of the country. We can’t control interest rates, but it will definitely make a good broker essential for most people to ensure they get the best deal.”

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