Inflation is falling but will be with us until 2025, interest rates are rising and will continue to do so till inflation is near target, but perhaps the newest threat to household budgets is that house prices could begin to decline and pull the one opportunity to save money from the grasp of homeowners. As the housing market experiences a lack of demand and house prices begin to drop, so do the values of properties. Despite a homeowner residing in their home and paying their monthly repayments, the value of the home matters, even if there is no intent in the near future to sell the property.

Last week the Bank of England increased the standard base interest rate by another 0.25% to carry the rate to a new high for the past 15 years at 5.25%. This has brought on more concern for homeowners coming to the end of their mortgage term or those that have already had theirs expire and have been moved to their lender’s standard variable rate (SVR) having forgone a remortgage choice. For those nearing the end of their term, those not on a fixed rate, and especially those on a SVR there are savings to be found with a remortgage.

The average house price fell for the fourth consecutive month in July according to Halifax. More expensive borrowing costs are being blamed for the decline in demand from home buyers. First time buyers are considering homes much smaller than two years ago when lender’s interest rates were at historically low levels. In some cases, they are putting their homeownership dreams on the shelf. The average house price dropped annually by 2.4%, and while that could have made property buying more affordable, any savings were erased by higher interest rates in mortgage offerings.

On Thursday, the expected occurred. The Bank of England’s Monetary Policy Committee (MPC) increased the standard base interest rate, which made this meeting the fourteenth consecutive gathering that resulted in a rate hike. The rate was raised by 0.25% to 5.25%, which was less of a surprise than at the last meeting in which the rate was more assertively raised by 0.50%. The current rate is now at a 15 year high, and while the rate was increased, the committee was divided about the action.

Finally, inflation seems to have let go of its stubborn grip and could be heading more rapidly toward the target rate of 2.0% than in months past. In June, the decline to 7.9% was hopeful as it could signal interest rates might not be increased as steeply as had been predicted. However, the change in the inflation rate will not slow down the efforts of the Bank of England’s Monetary Policy Committee (MPC) to tame inflation. Rather it is expected they will continue the assertive actions of past meetings to keep the momentum going. This could result in either a 0.25% or 0.50% rate hike to the Bank’s standard base rate of 5.0%. Either rate increase will take the base to a new high not seen in a decade and a half. 

The latest news on interest rates could be good or too optimistic. According to some experts, the peak rate is considered to be much lower than what was previously thought with an expected top rate of the Bank of England’s standard base rate of 5.75%. This is a positive switch from the previously expected rate of 6.50% and even with some experts forecasting higher and closer to 7.0%. The lower peak rate has come about due to inflation declining after being stubborn and barely budging with previous rate hikes.