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A rate increase of 0.75% will affect the property market

Many expect the Bank of England to increase rates by 0.75% in an effort to combat inflation. Some brokers were asked what it would mean for borrowers and the property market more generally. Their views can be found below.

Imran Hussain, director at Nottingham-based Harmony Financial Services: “People are beginning to realise exactly how low rates have been for the past decade-plus, and those who have gone in blind and possibly over-borrowed are facing some serious financial pain. Another rate rise this week may well see people who were looking at possibly upsizing put their plans on hold, but one thing it won’t do is deter serious first-time buyers or investors as in every market, there is an opportunity.”

Rob Peters, director of Altrincham-based Simple Fast Mortgage: “Borrowers coming off fixed rate mortgage deals are seriously unprepared for the full 240 volts of interest rate shock they are about to receive. Increased mortgage costs, combined with higher commodity and energy prices, will undoubtedly result in highly leveraged borrowers suffering the most. Some will have to downsize, buyer appetite will reduce, and many aspirational buyers will have to put their new home purchase on hold. Even then, though, the core need for people to have homes will still exist, and so the wheels won’t be coming off the property market just yet.”

Emma Jones, Managing Director of Frodsham-based broker, When The Bank Says No: “A further rate increase this week will likely put many people off from wanting to upsize unless they truly need to. For many, the prospect of potentially far bigger mortgage payments and heating bills will put moving up the ladder on pause. Further rate rises are likely to encourage more borrowing for home improvements and see people start tidying up their finances to reduce their monthly outgoings.”

“However, demand for homes is still as strong as ever, so we are certainly not expecting the housing market to completely halt even if rates go up by 0.75%. There is still a shortage of homes, so a sudden drop in prices is unlikely. We have seen a handful of lenders increase their rates already in readiness for Thursday’s announcement, but we can expect more last-minute product withdrawals before then.

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