In the coming months, millions of UK homeowners are going to be facing a tough financial situation when their mortgage term ends. Many are due to have their mortgage term end within the next six months. If they choose to remortgage, they will have much higher interest rates offered than before, but should they choose not to remortgage the interest rates they will face when they are moved to their lender’s standard variable rate (SVR) could cause a financial strain they are not expecting. It is often reported that the average SVR could be twice or more the interest rate level connected to a remortgage.

The current Bank of England’s standard base interest rate is 1.75% after having been increased by 0.50% at this month’s Monetary Policy Committee (MPC) meeting. This time last year, the base rate was at an all-time historic low of 0.1%. In comparison to last year, the rate looks much different and it feels much different to household budgets. The latest report on expectations of the need for the MPC to hike the rate further has a forecast of the rate rising to over 4% in the first half of next year. This should serve as a wake-up call to all homeowners that could but have not yet remortgaged.

In yet another reason for homeowners to seek a remortgage to possibly give relief to their household budget, the UIK is now forecasted to hit an inflation level of 18% in early 2023. This forecast comes from the US financial group Citi. The Bank of England has forecasted inflation to reach 15% early next year. Perhaps it matters not the level of inflation, but the fact that it is forecasted to keep rising. The impact could serve a greater hit on households due to the already expected higher cost of energy this winter.

Despite rising interest rates, or perhaps because of them, borrowing is currently popular. The standard base interest rate set by the Bank of England’s Monetary Policy Committee (MPC) has increased at each of the last six consecutive meetings which started last December. The then rate was at an all-time low of 0.1% which was certainly the motivation behind most of the borrowing done in 2021. The rate had been dropped to an over 300 plus years low due to the economic impact of the global pandemic.

UK’s largest lender, Halifax, has issued a report showing house prices declined for the first time this year in July. The decline fell by 0.1% from June to July. The last decline in house prices was reported last year in June. Some experts believe that the decline could be the usual summer dip as home buyers put their attention elsewhere. However, it is difficult to overlook that it could be the start of further declines in the market as affordability becomes an issue due to higher interest rates and the impact of inflation.

UK house prices have declined for the first time this year as buyers begin to exit the housing market. Interest rates as well as other economic factors such as inflation have had a negative impact on budgets. Confidence in the economy has also declined making some buyers take a backseat rather than move ahead with a purchase. However, Rightmove puts blame on summer distractions rather than the current economic conditions for the decline of house prices.