According to the Office for National Statistics (ONS), UK house prices declined at the quickest rate in more than a decade in the year to October. As would be expected, London, the area with the highest house prices, experienced the greatest decline. The ONS data is being blamed on the higher cost of borrowing as interest rates have increased significantly over the past two years. Not only are home buyers facing affordability issues, but so are homeowners as well.

Interest rates have risen substantially in the last two years, and for home buyers it has made the decision to enter the housing market one that needs more consideration. Not only has borrowing become more expensive, but house prices remain elevated from their steep climb during the pandemic induced housing boom. While buyers can choose to engage with the current rates, homeowners do not have the option for they must face current rates when their mortgage term ends. Their choice rests in being moved to their lender’s standard variable rate (SVR) or to choose a remortgage. Either way, when rates have risen, the new rate is likely going to look and cost very differently than the rate they were used to paying.

House prices are an important indicator of the state of the economy. At times it can indicate economic forecasts are going to fall short of their projected outcome or outperform the expectations of experts. This was the case when the pandemic caused lockdowns, and many expected a definite gloom and doom scenario for the housing market. However, the pandemic caused a strong demand for more space both inside and outside the home and created a strong desire for property that was unexpected. 

The Bank of England’s Monetary Policy Committee (MPC) met on Thursday to determine if their efforts to tame inflation have been good enough to let the rate stay steady. Not all members wanted to keep the rate at the current 5.25%. The vote was 6-3 and those that voted against the steady rate wanted to increase the rate. The voting was absent of any member looking to cut the base rate. 

The Bank of England’s Monetary Policy Committee (MPC) will gather for the last meeting of 2023 on Thursday. It is expected the members will hold the standard base interest rate steady at 5.25% due to the recent decline in the inflation rate. The MPC set base rate reached 5.25% in August and has remained so through votes in September and November. The same choice will likely result in December, but there are those that would hope for a rate cut.

Homeowners are struggling according to the results of a recent poll of advisers by Mortgage Solutions. A large number of Help to Buy homeowners are having difficulty remortgaging according to 71% of the advisers. In another report, this one by The Telegraph, there is a large number of first-time home buyers that have slipped into arrears with the number doubling over last year to 4,845. There are many reasons that could explain the hardship of first-time buyers meeting their repayments, but there could also be blame for the fact that some would have not taken into consideration what would happen when interest rates increased.