Housing market warning: Buying comes to a screeching halt ahead of interest rate hike | Personal finance | Finance

Property expert reveals latest UK buying trends

Home buying could come to a screeching halt with the Bank of England’s latest interest rate hike. On Thursday, the Bank of England will decide what the new base interest rates, currently at 1.75%, might be.

Market analysts at CMC Markets expect Bank of England (BoE) interest rates to rise to 2.25% in September, directly impacting variable rate mortgages.

Around 1 in 5 households in the UK have variable rate mortgages, and a further 3.1 million households have fixed rate periods which expire in 2022-23, according to UK Finance estimates.

With interest rates set to rise, borrowers whose repayments are directly linked to the base rate, as set by the Bank of England, will now have to repay their mortgages at rates between 3% and 4%, against 1.75% and 2.75% only five months earlier.

CMC Markets analyzed the latest June 2022 data from HM Land Registry, released on August 17, and concluded that the likely trend for house prices is in a temporary slowdown.

Home buying set to come to a screeching halt as Bank of England interest rate hikes

Home buying set to come to a screeching halt as Bank of England interest rate hikes (Image: GETTY)

CMC Markets expects BoE interest rates to rise to 2.25% on Thursday

CMC Markets expects BoE interest rates to rise to 2.25% on Thursday (Image: GETTY)

Speaking to Express.co.uk, Michael Hewson, chief market analyst at CMC Markets, said: “Homes sold in June 2022 are only up 1% in price from May, while the Last year, that was a much more generous 5.7%. surge.

“This is only the first month of this year that prices are slowing down at such a rapid pace, so it is advisable to exercise caution before jumping to conclusions. Remember that house prices may slow down, but they do not decrease.

“It is important to note that given that this is transaction data processed at the time, this does not take into account the big jump in interest rates that the Bank of England announced later this month, not to mention the even bigger rise in August.

“Therefore, despite soaring inflation and rising consumer prices across the board, UK house prices appear to be lagging as demand for housing has slowed. usually stopped abruptly.

READ MORE: Housing market set to ‘go on a roller coaster’ as prices rise

Michael Hewson said ‘demand for homes has generally come to a screeching halt’ (Image: GETTY)

“Most buyers are weathering the storm for a few more months at least, while some are also considering how the cost of living crisis will play out in the medium term so that the new mortgage does not squeeze their pockets beyond their comfort zone.

“For those who still want to get on the real estate ladder, there are plenty of fixed rate banking products that can protect them from the current mortgage interest rate spiral.

“They should, however, be prepared for the possibility of being faced with higher than expected repayments once the fixed rate period expires, as new variable rates are at the discretion of the lender.

“Fixed rates aren’t a panacea either, as they can now be set higher to start with. The buy-to-let market is just as volatile.

“Landlords will pass on increased mortgage payments to tenants by raising their rent or simply selling quickly to secure a better price.

“At the moment, however, those already on the homeownership ladder are generally better off staying put than moving or re-mortgaging.

“They wouldn’t get a good deal on their old home in this market and would probably end up losing more money overall.”

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“Most buyers are weathering the storm for at least a few more months” (Image: GETTY)

It comes after the Office for National Statistics (ONS) announced on August 17 that UK inflation rose to 10.1% from 9.4% two months earlier.

The BoE expects inflation to rise further, peaking at 13.3% in October, the highest since 1980.

He also expects the increase to trigger a five-quarter recession that will last from the last quarter of 2022 until the end of 2023.

In August, Octane Capital found that the average number of homes purchased using a mortgage decreased by 33% over the period from August 2021 to November 2021, from December 2021 to March 2022.

In August, Octane Capital found that the average number of homes purchased using a mortgage decreased by 33% over the period from August 2021 to November 2021, from December 2021 to March 2022.

Avg.  homes bought with a mortgage are down 33%, says Octane Capital

Avg. homes bought with a mortgage are down 33%, says Octane Capital (Picture: EXPRESS)

However, Revolution Brokers also told Express.co.uk that in the year to September 20, the UK property market saw just over £251 billion worth of property sold, of which 71% was sold. been fueled by the mortgage industry.

Their data indicates that 919,936 homes were sold during the year, of which 630,688 were loan-facilitated.

Almas Uddin, founding director of Revolution Brokers, told Express.co.uk: “In an increasingly worrying economic environment, a drop in activity in the mortgage market will always follow a series of interest rate increases. interest as buyers act more cautiously when entering the market.

“But make no mistake, even with a further increase from the Bank of England, the sector remains the engine room of the national property market and will continue to drive the vast majority of transactions which continue to progress.”

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