The interest rate has risen for the 13th consecutive increase to 5% in an effort to combat ongoing inflation, which currently stands at 8.7%.
The increase in base rate will see borrowing costs once again increase as the affordability squeeze on borrowers’ pockets continues to tighten its grip.
This comes as data released from MoneyFacts revealed the average two-year fixed-rate mortgage has risen above 6%. Meanwhile, one in 10 deals have been scrapped by lenders altogether.
Martin Lewis, best known from MoneySavingEx pert, has described the situation regarding mortgages as a ‘ticking timebomb’ that has now ‘exploded’.
Prime Minister Rishi Sunak has reaffirmed the government’s position that there will be no further help to homeowners with soaring mortgage costs, with many subsequently expected arrears and repossessions will rise in the coming weeks and months.
The increase has been disappointing, but some industry voices hope this is the final rise. And that whilst homeowners and first-time buyers will be facing the consequences of the rising interest rates, there is hope that the house prices will shift towards a realistic and sustainable price, a descent from the spike seen during the pandemic.
What does it mean for renters? On average, the rent for a new let is already 10% more expensive than it was a year ago, according to Zoopla.
Landlords who may already be borrowing quite heavily now face further increases in the mortgage rate they pay, leading to many increasing their costs again to help cover expenses. But it’s expected that more landlords will sell up, cutting the number of available rental homes and increasing competition.
We imagine this will be very stressful, with many enquiries from buyers and sellers seeking advice from every avenue, not just their lender. There’s also a sad possibility that some sales will fall through as buyers recalculate their affordability, as lost confidence may make them worried about future increases and job security in the hospitality and retail industries.
Whilst today’s news might spell doom and gloom for many, we remain optimistic at Hoowla, and we will continue to support our clients as best we can and hope that the situation will begin to improve towards the end of the year.