Mortgage rates increased at a record pace in 2022, with the 10-year fixed mortgage rate doubling between March 2022 and December 2022. With inflation increasing, the Bank of England introduced several bank rate hikes, resulting in higher mortgage rates. In January 2024, the average 10-year fixed rate interest rate stood at 4.7 percent. As borrowing costs get higher, demand for housing is expected to decrease, leading to slower house price growth and a potential market downturn.
How have the mortgage hikes affected the market?
After surging in 2021, the number of residential properties sold declined in 2022, reaching close to 1.3 million. Despite the number of transactions falling, this figure was higher than the period before the pandemic. The falling transaction volume also affected mortgage borrowing. In 2023, the value of new mortgage loans fell year-on-year for three quarters in a row.
How are higher mortgages affecting homebuyers?
Homeowners with a mortgage loan usually lock in a fixed rate deal for two to ten years, meaning that after this period runs out, they need to renegotiate the terms of the loan. Many of the mortgages were taken out during the period of record-low mortgage rates and are likely to face notable increases in their monthly repayment. About five million homeowners are projected to see their deal expire by the end of 2026. About two million of these loans are projected to experience a monthly payment increase of up to 199 British pounds by 2026.