Yet another report has shown that the housing market was still on an upward trend in January. According to the Royal Institution of Chartered Surveyors (RICS), 16% of respondents reported they had an increase in demand from hopeful home buyers. There was a 9% increase from December, which had given the strongest reading since the stamp duty holiday reached its peak in May 2021.

With the warning of higher interest rates, there was a rush to buy in the housing market. Home buyers were faced with higher house prices, but the ability to borrow a large volume of money at a low interest rate level was going to slip away. Because of the demand from hopeful home buyers, and the low supply in the market, house prices reached yet another record high. Halifax revealed that there was a 0.3% increase from December to January, and the yearly increase was 9.7% over the 12 months to the end of January.

As house prices rose across the UK, home buyers were still able to manage a climb onto the property ladder due to low interest rates. During the time, up to the end of September last year, the stamp duty holiday also assisted buyers. However, now that house prices are higher due to a shortage of supply in the market, and interest rates are higher, it is expected that a large number of hopeful home buyers are once again going to be shut out of the housing market. This could cause yet another problem, especially for homeowners.

Borrowing is now more expensive. The standard base interest rate set by the Bank of England’s Monetary Policy Committee (MPC) was doubled from 0.25% to 0.5% during the most recent meeting on 3 February. The move to hike the rate was expected due to the fast growing inflation rate. However, expected or not, it will prove to be a wakeup call to those that could be put into financial hardship as interest rates move away from the historic lows experienced due to the pandemic.

As expected, the housing market experienced a boom in January. The expectation for home buyers to flood into the market was based on buyers seeking to avoid having to choose a mortgage with a higher interest rate. The Bank of England’s Monetary Policy Committee (MPC) increased the historically low standard base interest rate in December from 0.1% to 0.25%. The next meeting set for the MPC would be February. This would leave a tight window of opportunity for homebuyers to purchase and still have access to cheap borrowing.

The UK is getting used to record breaking in the housing market and also in the lending market. As of late, the housing market has reached new highs again and again as house prices rose due to strong demand brought about by the pandemic. Also, last year, until December, borrowers had access to extremely low interest rates. The Bank of England’s Monetary Policy Committee (MPC) in response to the global pandemic lowered the standard base interest rate to the lowest level ever in over 300 years.