The average house price has increased by a little over 24% since the start of the pandemic. Demand grew when lockdowns began and the need to fit into a new pandemic lifestyle started which included the need to work, study, get fit, cook, and entertain at home became mandatory. The race for space, as it was called, pushed demand in the housing market at a time when interest rates were at an all-time over 300 plus years historic low. 

The average house price has increased by 24.1% from £217,911 at the start of the pandemic to £270,452.

There is an expectation of a shift in demand in the housing market. Interest rates are climbing and the current rate of 1.25% is higher than seen in over a decade. The next Bank of England Monetary Policy Committee meeting is 4 August and there could be a 0.5% increase to the standard base interest rate pushing the rate to 1.75%.

Even if the rate increases like the last MPC meeting by 0.25%, there is no denying that borrowing is much more expensive than it was at the end of last year, the start of this year, or even weeks ago. Slight increases in the standard base rate can have an impact on the rates offered with mortgages as well as remortgages from lenders and brokers.

Being able to afford the higher repayments will be an issue for hopeful home buyers and current homeowners, too. Home buyers are not the only ones being impacted by higher interest rates. Many homeowners, in fact millions, will be facing much higher repayments when their current fixed rate terms end. Those that have already had their mortgage term end and did not remortgage could be playing a risky game staying on their lender’s standard variable rate or SVR.

Rather than pay more than necessary, experts are encouraging all homeowners to shop online for a remortgage. In doing so, with quotes of possible deals in hand, a homeowner could determine what deal would save money, if a fixed rate is available that could lock in a current interest rate to save from facing rising rates, and even if there is the possibility to cash out built up equity to put money in hand.

Equity cash release remortgages are a popular choice for homeowners. Some are taking the cash and investing it back into the property for upgrades and improvements such as adding cooling systems or more energy efficient heating systems to prepare for higher energy costs in winter. While others are using the money for their unique needs, such as paying down debt, taking a holiday, starting a new business, or creating an emergency fund.

With higher interest rates making buying more expensive along with sustained higher average house prices, home buyers could begin to lose access to buying due to affordability as well as lose confidence in investing in debt with a possible decline in house prices in the future.

However, most experts forecast a sustained level of housing market growth throughout the year. This will be good news to first time homeowners that have had little time to pay down debt over the last few months or years. It should keep away the threat of going under water, or owing more than the value of the property which occurs when house prices decline.

The MPC meeting next month will offer insight as to where inflation sits currently and how much it has neared the forecasted 11.0%. It will also reveal how much the MPC believes is necessary to move the standard base rate to keep inflation in check. There will be a meeting in September to follow the one in August, so it could be an increase of 0.25% might be considered to allow those holding debt to adjust more and heed the warnings of higher and more rate hikes to come.