Interest base rate hits 10-year high – what do the experts say?

As interest rates move to a 10-year high, how might it affect house prices?

Now the Bank of England has set the base rate to 4% , is there any sign of hope for those looking to move or help loved ones make their first home purchase? Or are we set for a bumpy road ahead?


Credit: Shutterstock/Andrey Popov

This means those on a tracker mortgage that follows the base rate can expect the 0.5% increase to be added.

On the average monthly repayment for a £200,000 loan, this equates to around £57 extra a month according to Kellie Steed, mortgage expert at USwitch. Anyone on a fixed-rate mortgage may be less impacted.

“Fixed-rate mortgage interest rates, on the other hand, have been in gradual decline for the past couple of months,” says Steed “and this further increase to the base rate is not expected to impact this trend.”

The effect on standard variable rate (SVR) mortgages – those which you’re forced onto after your deal ends –  is still unknown.

“It’s less obvious whether this additional hike in the base rate will directly affect rates,” Steed adds, “although the average SVR at the current time mirrors the base rate, in being at its highest rate since 2008 (6.64%).”


Are house prices set to fall further?

Credit: Shutterstock/ADragon

Figures released by property portal, Rightmove, suggested that at the start of January, consumer interest was starting to rise again along with prices – with the average new seller price rising by 0.9% – the highest seen since 2020.

While the numbers are all still lower than previous year, Rightmove’s property expert Tim Bannister told us that the market is still looking reasonably positive:

“We’re still seeing buyer demand higher than the last normal housing market of 2019, indicating that people have the confidence to get on with their moves. If fixed deals do head further downwards this may encourage people further.”

Adrian Anderson, of property finance specialist Anderson Harris is a little less positive,  saying he feels there is undoubtedly a correlation between house prices, mortgage rates and finance availability.

“The property market has moved from a sellers’ market to a buyers’ market,” Anderson says. “Many of our clients are ‘waiting to see’ what happens to interest rates and property values, hence there is less urgency to transact.

“It is more challenging, for example, for empty nesters to downsize as those seeking to trade up and purchase larger properties are struggling to borrow the amount they require or are not prepared to pay the higher rates that are available now.”

Anderson confirms he has seen a trend towards prices decreasing in the form of buyers testing the market.

“With many experts predicting a fall in property values,” says Anderson, “some buyers who have ‘needs based’ purchases and want to move now are making offers at significantly under asking price.”

Can a buyer’s market bring any hope?

If you’re mortgage free and not negatively affected by today’s news, a potential drop might mean you may get less if you are selling, but you’ll also be able to buy for less.

For the first time buyers in your family, as Steed points out, there could be some hope: “With both house prices and fixed-rate mortgages expected to continue to fall throughout 2023, it’s perfectly possible that buying a home could be more affordable for first-time buyers towards the end of the year.

However, whether you will benefit from buying now or later will depend largely on your individual circumstances, so it’s a good idea to speak to a broker before you make a decision.”

Bannister agreed that for certain mortgage applications, the impact of the hike may be less noticeable.

“For those considering taking out a fixed mortgage deal soon, the good news is that this increase was widely expected by the financial markets and will have likely been factored into their plans,” he says.

“This means that we may see fixed-rate mortgage deals continue to edge downwards in the first half of this year, as some stability and calm continues to return to the markets.”

Family help can be invaluable

Credit: Shutterstock/Watchara Ritjan

For parents or grandparents looking to help their offspring take the first steps towards owning a property – no mean feat with the average cost of a UK home currently £261,200  – there are a few options.

With Halifax reporting that joint first-time buyers now account for 63% of mortgage completions, it seems shared ownership is a clear a way forward, rather than single buyers being able to afford their own property.

Products such as family springboard mortgages can also be a way to help and should be considered, advises Anderson.

“This is when a family member or friend can help a loved one get onto the ladder by providing a 10% deposit as security, which can be returned in 5 years’ time,” he says.

“The market needs more innovation like this to help get first time buyers onto the ladder. For instance, [our firm] arranges ‘joint mortgage, sole proprietor’ mortgages.

“A parent/guardian can be named on the mortgage without being named on the property title deeds.  This can help a first-time buyer borrow more.”

Sarah Harley

Written by Sarah Harley she/her


Since first picking up a paintbrush and experiencing the joy of re-decorating her bedroom in a questionable red, white and grey scheme as a young teenager, Sarah Harley was hooked on the world of interior design. This obsession even led to a real life ‘Grand Designs’ project in 2005 when she donned a pink hard hat and appeared on TV screens, project managing the renovation and extension of a Grade II listed 17th century Folly in South Wales.

Throughout her career, Sarah has gained an array of experience in several different roles, ranging from copywriting, PR, events management and photography to interior design and home staging. With her two passions being the written word and the joys of a beautifully designed home, Sarah’s mission is to open the door on the world of interiors, inviting readers in to help them work their way through the vast choice of products, ideas and trends so that their own homes can reach their full potential.

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