Homeowners were facing higher interest rates if inflation did not respond to the efforts by the Bank of England’s Monetary Policy Committee (MPC). In the start of 2023, the inflation rate was double digits, a bit over 10%, having come down from the peak of 11.1% reported in October 2022. The MPC had been fighting to tame inflation since December 2021, and when the peak hit in October 2022, many homeowners were sitting safe in their historically low two-year fixed rate and shielded from rate hikes. Come 2023 and mortgage terms ended leaving homeowners with a choice from much higher interest rates. The same will occur in the year ahead.

There has been a lot of good news for homeowners lately. All of it points to no further rate hikes by the Bank of England’s Monetary Policy Committee (MPC), that is as long as inflation continues to respond and head toward the target rate of 2.0%. It now stands at 4.6%, down from the previous report of 6.7%. The forecast is also for the second quarter of next year to possibly 

Amid the economic uncertainties and looming challenges in the UK, homeowners find themselves at a crossroads, navigating a landscape of potential financial strains. The intricate web of factors, from the specter of a recession to stubborn inflation and higher interest rates than in over a decade paints a complex picture for individuals seeking stability in their household budgets. The impending threat of a recession in 2024 casts a shadow over the horizon, with experts divided on its duration, and when or if it might occur. Whether a prolonged downturn or a shorter-term economic hiccup, the impact on consumers often precedes the official data. As households brace for the potential fallout, strains on financial stability are already palpable. Homeowners are struggling. More are falling behind in their repayments, and more are in arrears.

In the current economic landscape, homeowners are grappling with a series of challenges that have significantly impacted household budgets. The initial blow came from the pandemic, followed by surging energy costs and an unprecedented 40-year high in inflation. To compound matters, interest rates have soared to levels not witnessed in over a decade. Just two years ago, homeowners reveled in historically low interest rates. However, those affordable rates are now a thing of the past.

Higher interest rates are continuing to impact the UK housing market. Demand is declining from home buyers and much of the lack of demand could possibly be from the lack of affordability. The decline in house prices, especially asking prices as reported by Rightmove, has both a positive and a negative side. Offering the bad news first, declining asking prices could result in a decline in property values which impacts homeowners and their loan to value ratios when seeking a remortgage, and some might encounter negative equity which occurs when the property value declines below the mortgage debt. The positive side of declining asking prices is that it could reach a point that brings buyers back into the market despite higher interest rates.

As feared, there are homeowners and landlords struggling with their mortgage repayments due to higher interest rates. According to a report, the mortgage holders in arrears have doubled in a year. Homeowners falling behind on repayments have also increased. A sharper look into the data reveals that landlords are struggling more than most. It is thought that those that are had increased their portfolios significantly when borrowing was cheaper, or they are new landlords taking advantage of the opportunity of cheap borrowing when it existed. For those homeowners and landlords struggling, new borrowers or not, the first step to the best strategy to surviving the current economic landscape is an easy one.