Interest rate raised to 3%
The interest rate has increased to the maximum level of 3%, since the 2008 financial crash. The Bank of England raised the interest rate by 0.75%, making it the eighth consecutive increase and the rate’s highest level in 14 years.
The Bank of England’s decision to raise the rate from 2.25% to 3% will have an impact on mortgage holders, home buyers, and savers.
The most recent interest rate hike will have a particularly negative short-term impact on homeowners with Standard Variable Rates or tracker loans.
Rightmove’s Tim Bannister said: “The era of historically low interest rates looks to be over, which is making it more challenging for those new first-time buyers who are stretching themselves financially to try and get out of the frenzied rental market and onto the housing ladder.
After a period of extremely low interest rates, many homeowners now risk having to make significantly more expensive monthly payments. As a result of the Bank’s rate increase from 2.25% to 3%, customers with typical tracker mortgages will now pay an additional £73.50 each month. Mortgage holders with normal variable rates would see a £46 increase.
Analysts predict that rates will hit 4.75% next year.
Nonetheless, that peak is lower than forecasts had indicated a few weeks prior, when the administration was in disarray following the rejection of its mini-Budget.
“It’s important to look beyond the headline numbers, because, while “like-for-like” mortgage costs have been increasing, mortgage brokers and lenders will be able to help people assess the different options available to manage their costs and see if they can afford to move.” – Tim Bannister
Since the beginning of the summer, we have noticed a slowdown in market activity as the cost of living and rising interest rates have made moving more expensive. Along with the political unpredictability, the significant increase in rates has affected peoples’ plans and the demand for homes, and many people are opting to wait and see how events play out over the ensuing few weeks and months.
If you are trying to buy or sell a house and need help with the process and advice on these new changes, contact a member of our team to help you.