UK: Average Interest Rates on Mortgage Loans increase sharply
According to the Bank of England, the average interest rate on mortgages has risen to 4.4% in March, the highest level since 2008.
The knock-on effect of the high mortgage rates is that more people are opting to rent instead of owning a home. Unfortunately, this has led to rising rents across the country. The ONS recently reported that rents in the UK rose by 4.8%, the highest rate since 2016, while in London, the rate was even higher at 5%.
Financial analyst at Interactive Investor (UK), Myron Jobson, explains that when mortgage prices rise, people tend to rent instead of owning a home. This puts further pressure on the rental market, leading to rising rents. Additionally, Head of Housing Research at real estate company Knight Frank (UK), Tom Bill, believes that the lack of suitable properties is also contributing to the problem.
While there are some signs of recovery in the housing market, including slightly lower energy prices and a slight increase in real household income thanks to welfare payments, economists warn that home prices will continue to trend lower this year as mortgage prices remain high. Gabriella Dickens, an economist at Pantheon Macroeconomics (UK), predicts that while home prices will recover somewhat, they will continue to decline this year.
The rising mortgage rates in the UK have led to a slowdown in the housing market, a rise in rents, and a decline in home prices. While there are some positive signs on the horizon, the situation is likely to remain challenging for homeowners and renters alike as the UK economy continues to recover from the pandemic.
UK: Average Interest Rates on Mortgage Loans increase sharply
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