As interest rates rise, many homeowners are at risk of going into negative equity. It is thought there are almost 90,000 homeowners that could find themselves owing more on their property than the value of it. Home values are expected to decline as the housing market loses home buyers. New homeowners that purchased their properties when the Bank of England’s standard base interest rate was at an historic low, namely in 2020 and 2021, are likely the most at risk.

The warning has been issued to homeowners of upcoming repayments that are likened to a “ticking time bomb.” Many could be facing interest rate payments possible of doubling each month according to research. The Liberal Democrats have released data analysis confirming that mortgage holders will be facing the largest increase in interest payments ever on record. The warning leaves little in way of preparing or finding a solution, but a remortgage could be quite helpful to homeowners seeking to defuse the bomb.

The UK housing market is facing factors that could hold it back and make more problems for the economy. It is a critical part of our economy, and a struggling market will only further hinder our economy as it struggles against inflation and a deep recession. It was hoped the Autumn Statement would announce more to help the housing market, but experts are remarking about the lack of support. Mainly there was little put into place to bring more supply to the market that could bring back first-time buyers and the minimal stamp duty reductions will only be left in place until March 2025.

The Office for Budget Responsibility (OBR) has issued a forecast for UK house prices. A decline is due to occur in 2023 until the autumn 2024. The end of the year is expected to reveal growth of 10.7% followed house prices down by 1.2% in 2023 and an additional 5.7% in 2024. Homeowners should go on alert and prepare with this information because with declining house prices might come lower property values which could put a homeowner into negative equity.

The Bank of England’s Monetary Policy Committee (MPC) is expected to close out the year with another increase in the standard base rate. It would mark the ninth consecutive meeting that resulted in a rate hike. The last meeting, which occurred this month, brought the rate to 3.0%. Forecasts are calling for the standard base rate to reach 5.0% or higher next year before the MPC would consider inflation is under control and declining toward the Bank’s target of 2.0%.

The cost of buying a home is considerably more expensive than it was this time last year. Interest rates have exponentially increased as the Bank of England’s Monetary Policy Committee (MPC) hiked the standard base interest rate during each of the last eight consecutive meetings. Last December the base rate was almost zero at 0.1% and now sits at 3.0%. Of course, lenders increased their interest rates, and it has left many hopeful home buyers outside the housing market, especially first-time buyers.