Video: Reaction To The Base Rate Hike To 3%

In this week’s video, Ben and Joe talk about the recent hike in the Bank of England base rate to 3% and the potential impact it could have on the UK mortgage and property market. Watch the video above or you can read the full transcript below…

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Ben: The Bank of England has just increased rates to three percent. For a balanced insight into the impact that’s going to have on the mortgage and property Market, stay tuned.

Hi I’m Ben from Hannells and I’m back with Joe, one of our expert in-house mortgage advisors. We’re talking interest rate rises in this video.

So, Joe I know a question a lot of people are asking you is – interest rates just gone up to three percent what’s the impact on people that already have a mortgage?

Joe: So with people that have a fixed rate for example they will still have that rate until the end of their product. Now one thing I would say is make sure that you get your mortgage documents out and find out when your fixed rate ends because that’s going to be key for talking to a mortgage adviser to understand what’s next for you.

Now people on tracker rates, the tracker rates track the Bank of England base rate so now the Bank of England base has gone up tracker rates will go up sort of as well.

So, make sure if you are on a Tracker rate you understand what that means for you. Now if you are coming to the end of your mortgage term, speak to a mortgage advisor. Everyone’s circumstances are different so it’s key to speak to someone in the know that will be able to point you in the right direction.

Ben: Yeah and I think sometimes with this as well the tendency is to leave it till the last minute whereas you know this could have an impact on how much money you spend in versus your outgoing so it’s it’s better to have that information about when your term is coming to an end sooner rather than later. Speak to an advisor so you can make sure you’re prepared and ready for it if it is going up.

Joe: Yeah.

Ben: OK, so what’s the impact for people that are looking to take out their first mortgage – like what difference will they be seeing in rates now compared to if they’ve been looking maybe two or three days ago?

Joe: So for first-time buyers not a lot has changed to be honest. When they did the mini budget a few weeks ago and everything was crazy, mortgage companies didn’t know how to price their interest rates so a lot of them increased them quite a lot. Now what I’ve seen today is some mortgages have actually decreased their rates which is great news.

Ben: So, already less than 24 hours after the base rate has gone up lenders are already decreasing their mortgage rates?

Joe: That’s right yeah. I think a lot of banks and mortgage lenders are, you know, they’re comfortable with how the market’s looking now now everything’s settled since that mini budget and everything’s sort of gone back to normal thankfully.

So from a mortgage perspective I feel like mortgage lenders are quite comfortable and they’ve got, they’re very well funded there’s lots of money for them to lend – it is interest rates stabilizing now which is good news for the market but with the Bank of England base rate increasing what does that mean for an estate agent?

Ben: Yeah I know there’s a lot of interest in this, we were talking to BBC News just yesterday about that very subject.

So I think it’s fair to say from a property price point of view, prices have been rising at a rapid rate. If you take the last three years for example, back in June 2019 – I’ve got the stats here – the average UK house price was just under £231,000. In July 2022 that’s up to £292,000 – so in three years we’ve seen almost £62,000 worth of property growth.

Now if you go back to 2019 and you look at the same three years prior, prices only increased by £16,000 which is considerably less but even then 2016, 17, 18 and 19 they were still considered busy markets so I think what we’ve got to consider is the last couple of years during this covid pandemic era, they are an anomaly.

So had we not had these couple of years which have I think have been pretty crazy and we were experiencing the level of activity that we’re experiencing now both on the buyer and seller side, I’m pretty safe to say that the general consensus would be we’re in a pretty active market. It’s just these last couple of years have completely skewed what’s normal and then we get these interest rate increases, the furore that goes on around it we have the big headlines from the newspapers and it’s easy to then look for evidence to support the headlines that we’re seeing, which can blind you to what’s actually happening.

Which from our perspective – and I’m not just here to try and talk up the market hopefully we’re given a realistic insight into what’s actually happening – then it’s still busy, still a good time to get your house on the market – like I say prices have increased almost £62,000 over the last three years -there’s still plenty of buyer activity out there but as usual in the lead up to November, December and Christmas you do expect it to quieten down.

But for the last, almost 20 years since we’ve been operating as estate agents, we still sell plenty of properties during those periods.

Joe: The property Market is very similar to the mortgage market in that respect in during the pandemic the interest rates dropped. Some rates even dropped sub 1% which is is crazy in comparison to what rates usually are.

They were always going to gradually increase, it’s just the increase has happened quicker than expected. So yeah I think everything is getting back to normal, what we perceive as normal. I think it’s just happened, like the pandemic happened it just skewed everything didn’t it really.

Ben: Yeah I saw some mortgage figures recently as well that September 2022 there was more borrowing than in the same month in 2019, 18, 17 and 16. And like we say, even those were considered pretty good markets before the pandemic hit.

So if you take everything away that’s happened, you know, up to now and you were to take 2020, 21 and 22 out of the equation and we just carried on with this level activity from 2019 – people would just be getting on as normal.

Joe: Yeah I completely agree. What would your advice be to someone who’s thinking about selling their property?

Ben: My advice would be no different to any other time of year in any other type of market. Which is first of all get a valuation on your own property so you know how much you’ve got to play with with your own property.

Then go and speak to a mortgage broker, somebody like yourself so you can give them Crystal Clarity on what their financial situation is and what they can comfortably afford. And I know as we’ve talked about before there’s just so many mortgages that are available at the minute for different people’s circumstances and situations and rates are changing on an almost daily basis at the moment so you need to speak to somebody like you that’s got all that information to hand so you can make sure they get the best rate.

Then once you’ve done your due diligence and you’ve got your house price what you can afford to spend, make an informed decision on whether you can afford to buy the property that you want. If you can, go for it. If you can’t then maybe now’s not the time for you.

But ultimately it’s making sure you do that due diligence and don’t commit to any big financial decisions before you’ve assessed all your options.

So, if you’d like some expert advice, come and see us at Hannells – we’re here to help! Whether that’s talking to an expert mortgage advisor like Joe or one of the team, or booking a free valuation with one of our local branches you can find us online at www.hannells.co.uk, or send us a message or leave a comment below. So Joe, thanks for joining me as always, thanks for watching and we’ll see you on the next one!

If you have any questions or concerns about mortgages or property, or maybe you’ve got a suggestion for a topic you’d like us to cover in a future episode, please get in touch with us at Hannells at enquiries@hannells.co.uk.

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