The UK has seen a record five interest rate rises of 0.25% each in the last year, with the Bank of England taking the base rate from 4.5% last August to 5.75% this July through the series of interest rate hikes. According to some analysts and economists a further interest rate rise does not lie far off, and many expect a further rise to be announced after September’s Monetary Policy Committee meeting. This would take the interest rate – which is already at its highest in six years – up to 6%.
Recent reports also indicate that interest rate rises have had an effect on more than just repayments for those with variable rate mortgages. The rises may also be responsible for a slow down in house price growth in most areas of the UK, with the exception of Scotland, Wales, and the West Midlands. In other regions house price growth has slowed down by 50% according to recent figures, and this has resulted in a reduced demand for properties following these interest rate rises.
According to one industry professional: ‘House prices have finally started to cool significantly for the first time since the recent mini boom in the housing market got under way in 2006. Interest rates hikes have begun to affect the psychology of the market with potential new buyers starting to think twice before buying a home. The July rate increase may not mark the peak of the current interest rate cycle and earlier rate rises have yet to fully filter through. A softer landing for the housing market is in store as we move into the autumn.’
He added that the two latest interest rate rises in may and July seemed to have had to most negative impact on demand for properties, thus leading to the reduction in house price growth.
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