What do rising interest rates mean for homeowners and buyers?

The Bank of England raised interest rates yesterday (Thursday 3rd August 2023) for the 14th consecutive time, increasing the cost of borrowing again, in its bid to tame inflation.

The central bank’s Monetary Policy Committee increased its base rate by a further 0.25 points to 5.25 per cent – the highest level since February 2008. It follows a shock rise of 0.5 per cent in June, which has piled pressure on mortgage holders and the housing market.

The average standard tracker mortgage is expected to increase by £24 (typically) per month, but with inflation continuing to fall, what does this actually mean for homeowners and what are the options for those looking to buy a house?

In light of yesterday’s news, the CEO of Allison Homes, John Anderson, shared his thoughts:

“With inflation seemingly falling, I’m frustrated for all those aspiring homeowners that the Bank of England have felt it necessary to raise interest rates further, even if it is as little as 0.25%. It raises further challenges for consumers, just when fixed-term mortgages have started to fall and confidence is growing in the medium term.

“We know that people still want to own their homes – allowing them to take the next steps in their lives, with their families, friends, and communities. This demand is encouraging, yet we hear too often of people unnecessarily putting their lives on pause.

“The Government now needs to clarify its housebuilding policies, unlock the supply of land and make it simpler to achieve the 300,000 new homes each year that the country desperately needs. This, coupled with more attractive fixed-term mortgages, could help to ease the affordability pressures for homeowners and buyers.

“Allison Homes has many support schemes available to help make home ownership a reality. We encourage everyone looking for a new home to talk to us and see an independent financial advisor who may be able to help them navigate these different schemes, and access better mortgages that might not be available to the open market.”

Jason Blunden, an Independent Financial Advisor (and Director of Evolve Financial Solutions) gave his perspective:

“This base-rate rise gives the momentum needed to bring down inflation and was therefore inevitable.

“It does however highlight the benefits of buying a new build property, with its average energy-saving costs of £200 per month, and the opportunity to offset increased mortgage rates with various financial incentives packages.”

He advised: “There are plenty of schemes and products out there to help people to buy a property and if you are worried about your fixed rate, now is the best time to speak to a qualified mortgage broker about your options. It’s best to be prepared, explore the choices that are available and consider what the new banks charter can offer to you.”

If you’re interested in a new-build home and want to explore ways we can help you move, visit our website: https://allison-homes.co.uk/allison-homes-buying-options/