Housing market reeling after BoE hike interest rates in fresh blow for mortgage holders

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Current allocations to illiquid assets for those investors surveyed were typically between 11 per cent and 25 per cent, with 60 per cent of respondents falling into this range.
Current allocations to illiquid assets for those investors surveyed were typically between 11 per cent and 25 per cent, with 60 per cent of respondents falling into this range.

Prospective buyers and homeowners looking to reinstate fixed rate or tracker deals on their homes were met with a fresh blow this afternoon following the central bank’s decision to hike interest rates for the 13th time in a row in efforts to cool soaring inflation. 

It is expected that the decision will lead high street lenders to further raise the rates on the deals they offer. 

Just last week, HSBC pushed mortgage rates up twice in one week in an unprecedented move for the high street bank, as it navigated news that that the central bank would keep interest rates high. 

On Tuesday, fellow lender TSB also pressed pause on the sale of some of its mortgages, temporarily removing two-, three- and five-year fixed deals.

“More mortgage rates increases will eventually slide us into recession, which may be the plan if there is one in place,” Justin Moy, managing director at EHF Mortgages, told City PM 

“Its time for the government to take clear action on its own issues and prices, this is not a global problem anymore. The base rate has become the stick to beat the economy with, not to improve it.”

News of the interest rates comes amid a challenging time for the market, with house price growth also showing signs of slowing down. Recent figures showed UK house prices rose by 3.5 per cent in the 12 months to April 2023, down from a 4.1 per cent increase the previous month. 

“It’s been a disappointing week for anybody that needs to refinance this year. Markets probably require two or three months of meaningful falls in core inflation before swap rates begin to ease and lenders can pass that onto borrowers via lower mortgage rates,” Simon Gammon, managing partner at Knight Frank Finance, said. 

Gammon said the markets may have to wait until September to see any “decent falls” in mortgage rates, but warned it may stretch into 2024 if inflation proves “particularly stubborn”.

“Once we do see a couple of positive numbers and swap rates begin to fall, we’re confident that lenders will drop rates quickly,” he added.