Last week, the Bank of England rejected calls for an immediate increase in interest rates, holding them firmly at 0.1%.
Mortgage borrowers on tracker deals will welcome this news, but those in favour of increasing the base rate to control inflation have taken a hit.
The base rate has stood at 0.1% since 19th March 2020, where it was reduced from 0.25% just days before as a result of the pandemic.
Despite the Bank of England’s decision to maintain the current base rate, several UK lenders had already increased their mortgage rates and withdrawn their low rate products in anticipation of the central bank’s announcement.
The pandemic sparked an increase in house prices by almost £31,000, according to Nationwide Building Society. The cheap borrowing options can explain the hike along with the heightened demand for house purchases across the country.
Following last week’s update, The Bank of England has upgraded its forecast for peak inflation and warned price rises would hit 5% early next year.
An increase in interest rates could soar the cost of new mortgages and some existing ones, meaning homeowners would face higher monthly repayments.
Higher interest rates would likely slow down activity within the housing market, discouraging potential buyers and leaving some existing homeowners with no choice but to sell up.
A rate rise during December or early next year appears increasingly certain.
If you’re looking to purchase a new property or remortgage your home, our team have expert knowledge of the property market and can find you the best rates available. Our friendly advisers are at hand to help you navigate the whole process, so please don’t hesitate to get in touch to see how we can support you.