What is the Impact of Mortgage Interest Rates Rising and Falling Property Prices on Homeowners?

Estimated reading time 5 minutes

UK house prices fell in September – is this a sign of things to come?

Interest rates are set to rise this week for the eighth time since December 2021. They currently stand at 2.25% and the Bank of England is expected to raise them 0.75% to at least 3.00% on November 3rd.

Due to this rise in interest rates UK mortgage lending is likely to fall significantly. Total loans for house purchases may total just £11billion next year, a fraction of the £63 billion expected for 2022 according to a report from the consultant EY. 

House prices could fall by 8% next year before stagnating until 2027, according to experts at Lloyds Banking Group. Analysts at Credit Suisse say that house prices “could easily fall 10% to 15%” HSBC analysts have predicted fall of 7.5% nationally and 15% in London.

If you are on a tracker, standard variable rare, or variable mortgage your payments will rise almost immediately after any announced increase to the base rate. That is because your mortgage rate is linked to the Bank of England’s rate, so when the Bank of England raises its rates your mortgage company raises the rate of you mortgage and hence the monthly sum you pay increases.

When the base rate changes your mortgage provider will write to you and let you know what your new monthly payment will be and when that will come into action.  

As an example, a homeowner with a 90% loan to value mortgage on a £300,000 property with an interest only mortgage will be pay an extra £169 a month if their mortgage rate increases by 0.75%.

What to do if I can no longer afford to pay my mortgage?

If you are struggling to repay your mortgage and took out your mortgage after 31st October 2004 your mortgage lender must treat you fairly and give you a reasonable chance to make arrangements to pay off the arrears, if you’re able to. They must consider any reasonable request from you to change when or how you pay your mortgage.

If you don’t have enough money to carry on paying your mortgage or the arrears, you might decide that the best course of action is to sell your home. However, if your debt isn’t that high you may be able to manage by re-assessing your finances. Work out your income and your outgoings and see if you can reduce the outgoings to give you room to pay off your mortgage arrears. Selling your home should be the last resort to solving your debt problem but sometimes it is the right decision. Please do seek financial advice before making a decision on selling your property.

Don’t just hand back the keys to your mortgage lender or wait to get evicted because you will still be responsible for mortgage payments and other costs until the property is sold. If your home is repossessed your mortgage lender will sell your property and look to recover the money they have lent rather than get the highest price. The lender will also take the legal costs of the repossession and the cost of the sale from the proceeds. It is important to remember if when the mortgage lender sells the property the sum received doesn’t cover all the monies owed you would still be liable for any outstanding debt.

Discover how to stop house repossession with our complete guide

If you are thinking of selling your property, get a valuation to see whether the selling price will cover the mortgage and any repayment debts. If it doesn’t you will need to get your lender’s permission to sell the property. You also need to take into consideration how long it would take to sell your property and the costs involved also remember until the property is sold you are still responsible for the mortgage payments so the debt can increase.

I want to sell my home, can Gaffsy help?

If you think that selling your property is a solution to your financial challenges and have taken financial advice prior, then call Gaffsy, we can help.

If you want to sell your house fast and need funds in your account as soon as possible, by providing a few basic details Gaffsy will be able to give you a free cash offer today. 

You will be able to secure yourself a guaranteed quick house sale in a timeframe that suits you regardless of the condition of the property. There are no estate agency fees and we can help with your legal representation.

If you find yourself in other difficult situations such as divorce and inheritance and want to sell your home quickly we can help there too.  In conclusion, Gaffsy will provide you with certainty as to when and for how much your home will sell for. What are you waiting for call Gaffsy for your valuation today.

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