The UK housing market could be experiencing the cooling down experts predicted when the Bank of England’s Monetary Policy Committee (MPC) first began increasing the standard base rate. Since December last year, the MPC has met six times and during each meeting the rate has been hiked. It now sits at 1.75% after a 0.5% increase last week, the largest increase in 27 years. Due to the increase in interest rate offers with mortgages, home buyers could be turning their attention away from the market, but just as many could be having issues with affordability.

A day after the warning that inflation could reach an “astronomical” level of over 15% next year, the Bank of England’s Monetary Policy Committee (MPC) met for their August meeting and voted the standard base interest rate to increase by 0.50%. This is double the rate increase seen at each of the last four meetings this year that resulted in rate hikes of 0.25% and the largest increase in 27 years. The current base rate is now 1.75% and due to the warning about inflation all borrowers, homeowners and home buyers included, should be prepared for more rate increases over the coming months and into next year.

House prices have grown for twelve months in a row according to recently released data from Nationwide. July continued to see growth in the housing market despite higher interest rates, inflation woes, and continued rising house prices. The average house price was £271,209 with a recorded annual growth of 11%. Continued growth in the housing market is good news amidst a difficult economy.

After a standby month in which borrowers did not have to endure another rate hike, the wait is over. The 4 August, this Thursday, is the next Bank of England’s Monetary Policy Committee (MPC) meeting. The result of this meeting will determine not only the rate but the fate of millions of borrowers including homeowners. Those that are facing the nearing end of their current term will face different interest rate choices than before and it could determine their financial health and stability.

The current economy is shifting the housing market and due to higher interest rates along with high pricing a slow down is likely to occur. There could be a shock wave to the market as first-time buyers are shut out of the market and homeowners are pressured to stay put rather than upgrade or downgrade due to pricing and interest rates. Rather than a slow and steady correction to the market following the pandemic induced race for space in the market, it could be a faster cool off or even a freeze.

Homeowners are being encouraged to shop for a remortgage to discover what opportunities are available. There could be savings and other benefits to be found at a time when adding to the household budget could be very helpful. If not prepared, homeowners could be in for financial shock when faced with higher interest rates that they are not accustomed to and haven’t faced in over a decade.