Why Interest Rate Rises Won’t Affect the UK Property Market


After months of rising interest rates, many were worried that house prices were going to level off. In fact, there are a number of reasons why another Bank of England base rate hike isn’t going to affect the market at all. While there is a correlation between house prices and inflation, what often happens is a rise in interest rates means a lower demand in people purchasing properties, which in turn leads to prices coming down. It’s also true that, as energy costs rise, there'll be an increase in those seeking to rent rather than buy.

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Due to continued demand, the average price for renting a home in the UK - particularly in urban areas - has increased by up to 8.3% over the course of the last year, the fastest rise in over a decade. Again, this is good news for landlords, who have no shortage of viable tenants looking for accommodation.


It’s also worth noting that, at present, the labour market is also in much better shape than predicted. It was previously thought the end of the furlough scheme would have a negative impact on employment. However, these concerns have proved to be largely unfounded. Instead, it’s yet another factor contributing to a consistently stable UK market.


Meanwhile, a weak pound means it’s a great time for overseas investors to buy London property and capitalise on the increase in rents. Changes in legislation and tax haven’t had a negative impact on UK property purchases, even if prices are growing at a slightly reduced rate.


Despite the Bank of England’s recent interest rate rises, they still remain at historically low levels. It’s also thought it will take over eighteen months for these increases to be felt in the UK housing market. Changes in where people want to live post-pandemic are also a factor, and as many built up savings over that time, there’s a reported £200 billion in extra savings ready and waiting to flow back into the economy.


Research also shows that cash buyers have been slow to return after the pandemic. This, however, means assets becoming more valuable overall. Ultimately, it remains to be seen how the rise in interest rates will affect the market in the long term. For now, though, projections are bright, with overseas buyers and landlords generally in a strong position, a situation that looks set to continue well into 2023.


Sources: BuyAssociation, EconomicsHelp, tdproperytinvestment, Hamptons,

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