Uk Mortgage Rates & High House Prices/Rents

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Uk Mortgage Rates & High House Prices/Rents With many people in the UK already juggling their budgets to cope with rampant inflation, the possibility of a recession, and high house prices and rents, Bloomberg News talked to financial advisers about how this latest development will affect your finances and what you can do about it.

The Bank of England’s half-percentage point interest rate hike to 1.75% — the biggest

Mortgage Rates

Home loan rates are seeing record increases and many of the cheapest deals are already gone. The average price of a two-year and five-year fixed-rate mortgage has risen by about 0.5% this month to 3.74% and 3.89% respectively, according to comparison site Moneyfacts. This means an average monthly mortgage repayment for a £207,708 property bought with a 25% deposit is set to increase by £52, according to credit broker TotallyMoney, or £196 more than last November.

Remortgaging to get ahead of further increases is a good idea, if you can secure an attractive rate. But it’s important to factor in the cost of any early repayment penalty you may have to pay to break out of your current loan. “People remortgaging should apply three to six months before their current deal expires as the process takes time,” said Adrian Lowery, personal finance analyst at wealth manager Evelyn Partners.

Home Buying In A Recession

Beside the rate hike, the Bank of England warned that a recession is likely to hit this autumn and last through next year, meaning house price growth will likely slow down. The central bank’s Chief Economist Huw Pill said higher interest rates may also cool prices but are unlikely to lead to a crash.

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Savings Accounts

Good news for savers: the hike should mean higher interest on savings accounts. Rates vary greatly between banks, so do your research and aim secure at least 1.75%, as that’s the BOE’s bank rate and should be available across the board.

As savings accounts usually offer lower returns than stocks and bonds — the best long-term fixed rates range from 2.5% to 3.35% — financial advisers say it’s preferable to invest your money elsewhere, or to pay off other debt, as long as you already have a safety net in place.


If you can afford it, increase your monthly mortgage payment to reduce the burden of debt and offset the impact of rising rates the next time you remortgage. If you’re on a variable rate and intend to stay in the house for a few years, move to a fixed rate to avoid further hikes, said Heather Owen, financial planning expert at wealth management company Quilter. If you’re looking at a new mortgage, a longer-term deal will let you lock in a rate now and hedge against future hikes, although remember those early repayment fees.

Uk Mortgage Rates & High House Prices/Rents

Credit Card Debt

The BOE rate hike will likely lead to higher interest on credit cards. A lender has to tell you of any increase in rates, so you should get notified. It’s a good time to review all your consumer debt and prioritize payments that have the highest interest, experts say.

Car Loans

If your credit score is strong, you might also be able to get a 0% balance transfer deal. These allow you to pay down credit card debt directly, rather than interest on the debt. The arrangements are for a set period of time, usually two years, and normally incur a fee.

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READ: Reasons Why You Need A Mortgage Today

Interest rates on your car loan are also likely to go up as a result of the BOE’s decision. However, rates for car loans are largely determined by your credit score, ranging from 2.4% to 15%, according to online personal finance site MoneySavingExpert, so the most important aspect is to keep your credit rating in check. Make sure you’re not asking for any new line of credit shortly before you seek out a loan, as that could hurt your score.


Those looking to cash in their pension fund will enjoy a better deal than a few months ago. As an example, a £100,000 pension pot will get you an annuity income of about £5,800 a year now, compared to £4,882 last April, according to financial service firm Hargreaves Lansdown, although the income a person receives depends on individual circumstances.

If you’ve not cashed in your annuity yet, look for the latest offers and pick the best one before signing any long-term deal, said Quilter’s Owen.

Student Loans

The BOE’s interest rate hike doesn’t impact student loans directly, as the rate is determined based on a measure of UK inflation and was capped at 7.3% this year.

SOURCE> bloomberg

Uk Mortgage Rates & High House Prices/Rents