Since December 2021 the Bank of England has put up interest rates five times – it now stands 1.25% and, with another announcement due on August 4th, it is set to rise once again.
The interest rate has increased in a bid to combat the rising rate of inflation.
At present, the average mortgage rate is around 3.37% for a five-year fixed rate on a typical £250,000 loan with a 25% deposit, compared to 2.64% in December. This means that the annual cost of a £25,000 mortgage has increased by over £800.
What does this mean for homeowners, first-time buyers and those wanting to move?
House price growth is expected to slow down throughout the rest of 2022 with prices rising at less than half the rate of 8.4% in 2021.
Although house price growth will start to slow down and stabilise it doesn’t mean that prices will fall.
Whenever someone applies for a mortgage – either purchasing alone or in a couple – affordability rules mean that they would have had to prove they can withstand rising interest rates. This means that the number of forced sales will stay low.
The current affordability rules are set to be adjusted and buyers will no longer need to prove that they can afford repayments at the standard variable rate plus another 3%.
The majority of homeowners are in a fixed-rate mortgage so a large proportion of people are protected from any interest rate rises.
House price growth
The current levels of house price growth are still strong – and at present they are at the highest rate since 2016. Over 1.2 million homes are expected to be bought and sold during 2022.
Should you move now?
If you are considering a house move, the advice is to take advantage of current market conditions and push ahead with your plans. It’s currently taking over five months to move, so if you want to be settled in time for Christmas it’s better to act sooner. What’s more, house prices are stabilising and there’s more choice – plus you’ll secure a mortgage offer before rates go up again but make sure you choose a fixed rate.
Clyde Property is a leading independent, multiple award winning estate and letting agent with 30 years’ experience in selling and letting property in Scotland. Just call your local Clyde Property branch today, for friendly, impartial advice on finding your next dream home.
