Buyers urged to get moving on a mortgage as rates hit 13-year high

Buyers are being urged to act now to secure decent mortgage pricing as interest rates hit a 13-year high yesterday.

The Bank of England’s Monetary Policy Committee has increased the base rate from 0.75% to 1%.

The Bank said it now expects inflation to hit 9% in the coming months - up from its previous forecast of 8% - and reach 10.25% by the end of the year, which could mean interest rate rises to attempt to bring the rate down.

Agents aren’t expecting any immediate impact on the market due to the latest hike but have warned buyers that it may eventually start to get harder and more expensive to get a mortgage, especially with rising bills elsewhere. 

It may also influence how much buyers can afford to pay for a property and the type of home they look at.

Alex Lyle, director of Richmond estate agency Antony Roberts, said: "Continued lack of stock is more of an issue. At present, buyers are anxious, not so much about rising house prices or mortgage rates, but limited choice. Those buyers who need a mortgage appreciate that while rates are rising, they are still incredibly low. 

"Having said that, these now regular increases to interest rates, the almost-weekly adjustment to mortgage rates and rise in the cost of living, will inevitably have an impact on the housing market sooner rather than later."

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said it is first-time buyers who will be clobbered on all sides by rising rents, higher interest rates and more stringent lending criteria. 

He added: “Yet while they often come off worse, they are so vital to the successful operation of the housing market, not only at the bottom of the ladder but connected in chains right to the top.”

Dominic Agace, chief executive of leading estate agents Winkworth, said its offices are still seeing an increase in buyer registration, warning:  “With further interest rate rises predicted for the year, we do expect this to affect demand later in the year, in particular amongst those requiring higher loan to value mortgages - typically first time buyers.

“This could slow price growth in areas supported by these buyers, with lower disposable income margins hit by increased living costs and interest rates affecting affordability.  With a strong labour market and interest rates remaining historically low, we don't expect this to lead to price falls.”

Nick Leeming, chairman of Jackson-Stops added that most property buyers who are mid-purchase would have worked with a broker to secure a fixed rate deal, but said now is the time for those thinking of moving house.

He said: “We know there will be more rate rises to come, so finding a fixed deal from a recommend mortgage provider now will help mitigate any future hikes.

“We may see house price rises moderate in the coming months as a result, but with demand remaining as high as it is, I don’t see transactions dropping any time soon. 

“We’ve all watched house prices rise at their fastest rate in 18 years and we look to a period of market stability in the longer term. 

“Our branches have seen an increase in supply over the past week as properties hit the market ready for the summer, with a busy few months predicted as many rush to secure a mortgage.

“We are talking about property market cycles, from seasonal to economic ups and downs, where finding a pattern can help us feel more confident about the market ahead. Many have predicted that we have a few years left to reach the top of the market, but if you are selling now and also buying now, it all comes out in the wash as prices will be relative. 

“Selling now while demand is strong could mean getting the best value for your home. But what you don’t want to do is be in a position where you are forced to sell in a market dip and then buy again as values recover. This is a fast moving market so my advice to buyers and sellers would be to act now and with due diligence.”

Further interest rate hikes may also influence the type of properties that buyers consider, Rightmove claims.

Tim Bannister, the portal's director of property science said: "We do anticipate affordability constraints and these economic headwinds such as rising interest rates to have more of an effect on the market later in the year.

"People will need to make decisions around what they can afford, which may mean some people need to lower the property price bracket they are aiming for, assess the mortgage products available in terms of duration and fixed-rate length, or raise a higher deposit in order to borrow less.”

This sentiment was echoed by Nathan Emerson, chief executive of Propertymark, who said: "We don’t anticipate this demand will be watered down but what those movers are able to pay will certainly start to be reconsidered over the coming months."