THE Bank of England (BoE) hiked its base rate to 3% today, piling pressure on mortgage owners.
It increased its rate from 2.25% to 3%, the biggest single rise since 1989, in a bid to slow soaring inflation and encourage people to save.
Often, high street banks will up their interest rates when the BoE hikes the base rate.
While that’s good news for savers, it means millions of mortgage owners will see their monthly repayments pushed up.
But what does it mean for house prices?
House prices hit a record high in October, but following the Government’s mini-budget there’s been a slowdown in the market.
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Rising mortgage interest rates have seen potential home movers hold off and wait to see what happens before buying up.
Following the interest rate hike today, the Bank of England said it expected recent falls in house prices to continue due to higher mortgage rates.
Nick Morrey, from mortgage company Coreco, meanwhile said house prices would fall next year but said nothing would happen straight away.
“This is what we expected and the markets were expecting.
“Next year house prices are likely to fall somewhere between five to 10%.
“But that would take prices back to June 2021 levels.”
Meanwhile, Paul Higgins from the HomeOwners Alliance, said there would not be an immediate impact.
“In the near term, house prices will remain underpinned by a shortage of homes for sale.”
Rhys Schofield, managing director at Peak Mortgages, said with BoE rate rises forecast to be less than originally thought, he didn’t foresee any immediate changes in house prices.
He added: “But it does seem that people are going to have to be realistic about house prices so we’ll likely see them come down next year.
“This will negate some of the 20% plus increases since the Covid pandemic.”
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We’ve explained what the BoE’s interest rate rise means for mortgage repayments.
Plus, if you want to know what the base rate is, we explain it in our guide here.
