A warning has been offered by one large mortgage lender of rising interest rates, and experts believe it is the opening of a gate in which many others will follow. Santander has given notice they are going to increase their interest rate offerings across several mortgage products on Wednesday. They are not the first to do so, but others have done so more quietly without warning. The broad announcement should put borrowers on alert, and it will come as no surprise as it was considered the lending market would pull back from its deeply competitive mode and take footing in a less risky lending market.

In February 2022, the Bank of England’s Monetary Policy Committee (MPC) in their first meeting of the year, increased the standard base interest rate to 0.50%. It was the second increase in what would end up being fourteen consecutive MPC meetings that resulted in a rate hike. Throughout 2021, until the December MPC meeting of that year, the rate had been at an historic all-time low due to the pandemic before it increased from almost zero at 0.1% to 0.25%. Despite the increases that had come, borrowing was still cheap and with the warning of more rate hikes on the way, there was strong motivation for hopeful home buyers to purchase and obtain a low mortgage rate before they would likely be higher.

When interest rates began to rise and the housing market began to slow, homeowners were warned of the possibility of their slipping into negative equity. Doing so would put a remortgage out of reach and with higher interest rates in place not being able to remortgage could be tragic for some homeowners. Affordability issues could arise as a homeowner becomes a prisoner of their mortgage and are at the mercy of higher interest rates.

In the tumultuous economic landscape of today, UK homeowners find themselves besieged by a confluence of financial challenges. Some are still recovering from the financial aftermath of the pandemic and inflation has taken a toll. This time last year, the inflation rate had reached double digits. Compounding these woes, interest rates have soared to levels unprecedented in over a decade. Merely three years prior, historic lows prevailed, but now, astute homeowners are advised to delve into remortgaging as a strategic shield for their household budgets. This urgency is particularly pronounced for those nearing the end of their mortgage term or those who've already reached it and, without a remortgage, have been shifted to their lender’s standard variable rate (SVR).

First time buyers are not having an easy time of it in the UK housing market. House prices are elevated, and borrowing is expensive. Saving for a deposit, according to a recent report, could take fifteen years or more for the average first time buyer. Along with saving for a deposit, hopeful home buyers are dealing with inflation. However, buyers are finding ways onto the property ladder, and some are doing so in creative ways.

As would be expected, the housing market has benefitted from the lower interest rate offerings available with mortgages. Despite the Bank of England’s Monetary Policy Committee (MPC) voting to hold the standard base rate steady for four consecutive meetings, lenders have taken it upon themselves to lower their offerings to attract the attention of borrowers. Some rates have fallen below the current base rate of 5.25%. Hopeful home buyers have taken advantage of the offerings, and the housing market has achieved the highest average house price increase since October 2022.