Sold everywhere:

What’s Happening with UK Interest Rates?

  • Free Cash Offer
  • No Hidden Fees
  • Sell In Your Own Timeframe

Interest rates in the UK are a hot topic these days due to the number of changes that have occurred. Of course, the interest rate changes in response to other issues affecting the national economy and global economy at large. So, if you’ve been following the news, it’s no surprise that the current state of interest rates matches the tone of other events happening across the economy. 

However, interest rates are not just something that affects politicians; they affect everything else, including personal savings and the property market. Both of which are incredibly important for anyone with a vested investment in property. In this article, we’ll take a close look at these interest rates and what they mean in the property world. 

Let’s get started. 

What is the current interest rate?

At the time of writing (just before the start of 2024), interest rates were set at 5.25% by the Bank of England. This is a decrease from the regular increases that we have seen throughout the last year. 

How High Will/Can Interest Rates Go in the UK 2024?

Now, while we can’t predict exactly what will occur, we can first look at the underlying factors behind the current interest rates to determine the likelihood of the situation changing anytime soon. 

To start with, we know that The Bank of England has been grappling with a unique economic scenario: a combination of weaker growth and persistent inflation. The Bank of England adjusts interest rates to control inflation, which usually occurs due to economic growth. 

When the economy grows rapidly, it can lead to increased demand for goods and services, pushing up prices and inflation. To cool down this inflation, interest rates are raised, making borrowing more expensive and saving more attractive, thereby slowing down spending and economic growth. However, what we see currently is high inflation without the usual economic growth. 

It’s also worth noting that with the current ‘cost of living crisis’, prices for goods and services are high. To control this, the Bank of England is likely to maintain or raise the high interest rates that we’ve seen over the previous year. So unless this crisis can be managed and prices for goods are controlled – interest rates will remain high.

Additionally, according to the International Monetary Fund (IMF), the UK’s growth has slowed “fairly sharply,” and the outlook remains subdued. Now, it’s worth mentioning that the IMF provides policy advice regarding economic and financial issues. So what do they advise? The IMF warns that the Bank of England will need to keep interest rates high into 2024 to manage this situation. Initially, the IMF had forecasted interest rates peaking at 6%, but this has been revised down to 5.5%. 

How Long Will UK Interest Rates Stay High?

As mentioned earlier, interest rates change based on other factors, the most important being inflation trends and economic growth. The IMF’s outlook suggests that the UK will experience a period of ” subdued growth,” indicating that high interest rates could be the norm for some time. 

Additionally, The Bank of England usually adopts a cautious approach aimed at curbing inflation without stalling growth. This again suggests that interest rates will remain high until the economy recovers and inflation is under control. 

Will Mortgage Rates Go Down Any Time Soon?

The current high interest rates have a direct impact on mortgage rates, which remain historically high. The current base interest rate has been set at 5.25% by The Bank of England at the time of writing. This was the first time in many months the interest rate hadn’t been increased. Additionally, there are hopes that as inflation is brought under control, interest rates can also be reduced. This won’t happen overnight, and it will take time, but analysts have predicted that the current interest rate will start to decrease by June 2024 and will progressively reduce after that. However, for this to happen, the economy and all other external factors that play a part must remain stable. 

It’s also worth mentioning that higher mortgage rates result in households paying a lot more towards their monthly repayments. This financial strain on top of the ‘cost of living crisis’ will be a top priority for many government figures. So we can expect that this is a top priority that they will be aiming to address when it is possible to do so. 

Should I Fix for 2 or 5 Years?

For homeowners and prospective buyers, the decision to fix mortgage rates for 2 or 5 years is an important one. As mentioned earlier, there is a prediction of a gradual decrease in interest rates starting from mid-2024, so a shorter fixed-rate period would seem appealing. However, it’s never guaranteed that the rate will indeed go down. We’ve already seen so many turbulent events in the past three years alone that the saying ‘ anything can happen’ has never been so true. There is definitely uncertainty about the exact time and the pace at which a rate reduction would occur. The benefit of fixing for a longer period will be more stability and protection against a higher interest rate in the future. 

What is the Interest Rate Forecast for the Next 5 Years?

Looking ahead, the interest rate forecast is somewhat optimistic. The Bank of England expects inflation to fall to the government target of 2% by the end of 2025. Whether this can actually happen is still yet to be seen. This is because inflation must first decrease along with an improvement in the economy. This is likely to take some time. Other research companies are less optimistic and predict that the base interest rate will decrease to 3-4% by the end of 2025. 

Again, this can only occur if inflation is controlled and the economy picks up successfully. 

How does high interest rates affect buyers?

From a real estate viewpoint, high interest rates affect homebuyers. Specifically, a higher interest rate results in higher mortgage rates. Here’s a breakdown of what this means for someone looking to purchase a property in the near future. 

Increased Borrowing Costs

High interest rates result in higher costs for borrowing money. As mentioned above, higher interest rates equals higher mortgage rates. This results in the total costs of a mortgage increasing. This makes buying a property more expensive as monthly mortgage payments increase.

Reduced Affordability

As borrowing costs rise, homebuyers will need to reassess their budget when it comes to looking for a property. Some people may no longer qualify for loans with a higher interest rate. On the plus side, for some buyers, this will mean there’s less competition. 

Slower Property Market

High interest rates can lead to a slowdown in the market. As mortgage rates increase, the demand for homes tends to decrease, and sellers may find it harder to sell their properties. This shift can create a buyer’s market, providing more negotiating power to those looking to purchase homes.

How does high interest rates affect sellers?

It’s not just buyers who are affected. In fact, those looking to sell may be affected even more so than buyers. Here’s how:

Reduced Buyer Demand

High interest rates typically result in higher mortgage rates, making it more expensive for potential buyers to finance home purchases. This can lead to a decrease in overall buyer demand, as some potential buyers may instead choose to save and wait for better mortgage rates. However, there is always the option of looking for cash house buyers. These are individuals or companies who have the funds ready to make a purchase and are not tied down by mortgage rates. 

Extended Time on the Market

With lower demand, properties may stay on the market for a longer period. Sellers may find it takes more time to attract qualified buyers who are willing to commit to higher mortgage rates. Extended time on the market can also lead to increased costs for the seller. Additionally, some sellers may experience property sales falling through at the last minute due to issues with the buyers’ mortgage approval. So, sellers must remain vigilant and ensure buyers are qualified. 

Pressure on Property Prices

In a market with high interest rates, the market shifts to being a buyers’ market. As such, sellers looking for a quick sale may face pressure to adjust their property prices to make them more attractive to potential buyers.

Negotiation Challenges

In a market with reduced demand, sellers may find themselves in a weaker negotiating position. In a buyers’ market, the buyer has the leverage to negotiate lower prices or request additional concessions, knowing that the pool of interested buyers is limited.

Shift in Seller Expectations

Sellers may need to adjust their expectations regarding the speed of the sale and the final selling price. High interest rates can create a market where properties may sell for less, or it may take a long time to find an interested buyer. 

Effect on Investment Properties

Many investors who had chosen a buy-to-let property may find themselves in a predicament, especially for those who had financed it with a mortgage. As mortgage rates rise, the potential return on investments decreases; this will usually influence the decision to sell. 

The UK’s interest rate is essentially a balancing act between managing inflation and supporting economic growth. As we move through 2024 and beyond, how these rates are affected will be closely related to the broader national economy and the global economy at large. We’ve already seen disruption on a large scale over the last few years and how that has contributed to higher interest rates. However, with more stable periods, we can expect to see the interest rate falling. 

For sellers looking to sell their property, we can help. Regardless of the market condition, mortgage or interest rates, we can get your property SOLD. And that’s without any fees or legal costs. All you have to do is submit an online valuation and leave the rest to us. 

Featured articles

Should I Release Equity From My Home?
Do You Need to Insulate Your House – And How to Do It
Are Electric Blankets More Cost Effective Than Gas Central Heating?

Please enter your details below and a member of our team will be in touch to discuss a free valuation for your home.

"*" indicates required fields


Section Break


Section Break

This field is for validation purposes and should be left unchanged.

By submitting your details, you agree that we may keep this information safely. Our Privacy Policy has further details