How will another interest rates rise impact mortgages and housing?

Interest rates rise 

The Bank of England has raised UK interest rates to their highest level for 14 years in a bid to tackle rising living costs.  

Interest rates were increased for the ninth consecutive time since December last year, increasing rates by half a percentage point to 3.5%. 

The Bank of England said "further increases in Bank Rate" may be required to tackle what it fears may be persistent domestic inflationary pressures from prices and wages, but no further announcements are expected before 2 February 2023 

"The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response," the Bank of England said. 

How will the latest interest rates rise affect homeowners? 

Mortgage rates have generally been rising with the BoE's consecutive rate rises since last December but how much payments increase will depend on the type of mortgage you have. 

Tracker mortgages are linked to the BoE base rate – which means you will see an immediate impact on your mortgage repayments after the BoE rate hike. The average mortgage payment is expected to rise by about £73.49 monthly for the average tracker mortgage, and £46.22 for the average standard variable rate (SVR) mortgage.

However, while the UK is already believed to be in recession, the Bank of England believes the economy performed better than expected between October and December.  

It now expects the economy to shrink by 0.1% in the final quarter of the year, compared with previous expectations of a 0.3% fall. 

What does it mean for the housing market? 

Paul Hilton, CEO of ESPC, explains: “This increase in interest rates was expected and has already been priced into many mortgage products. 

“While it has been reported that we could see a downturn in the property market, the market in Scotland has remained relatively consistent, and we expect that demand for quality local housing stock will remain, albeit at a calmer pace than has been seen recently.  

“It is encouraging that the Bank of England said the economy performed better than expected between October and December, which may give some reassurance to buyers and sellers.  

“The full effects of this remain to be seen but owning a home is a good long-term investment and seeking expert advice is crucial.  

“When it comes to buying or selling, ESPC'S solicitor estate agents are duty bound by the Law Society of Scotland to do their very best by their client. It’s never too early to talk to your solicitor estate agent about your plans.” 

Seek expert advice 

If you want to sell your home, expert advice from your ESPC solicitor estate agent on property types and the long-term value of home ownership coupled with monthly affordability advice from ESPC Mortgages is key.   

The initial consultation with an ESPC Mortgages adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £395 (£345 for first-time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.

The information contained within this website is subject to the UK regulatory regime and therefore restricted to consumers based in the UK.

The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren’t able to resolve themselves. To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk.

ESPC (UK) Ltd is an Appointed Representative of Lyncombe Consultants Ltd which is authorised and regulated by the Financial Conduct Authority.