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Interest rates rise again - what does this mean for sellers?

In early February, the Bank of England announced an interest rate hike, and rates climbed from 0.25% to 0.5%. Interest rates rising is likely to be of interest to sellers as interest rates going up could possibly deter buyers.

But when analysing property forecasts and commentary for industry figures, the outlook may not be as bleak as sellers may fear.

In this article, we set out why interest rates have risen and how this could impact sellers.

Why did interest rates rise?

According to the Bank of England’s website, they have stated that they increased interest rates to adhere to their target of keeping the rate of inflation at 2%. It has acknowledged that at present, the inflation is higher than that and attribute this to rising costs of energy and imported goods from abroad.

On its website, the Bank says: “We think that many of the things that are causing higher inflation won’t last and that inflation will begin to fall back in the second half of this year and during next year.”

Essentially, it has raised the interest rate from 0.25% to 0.5% to keep the rate of inflation down as the cost-of-living crisis bites. The Bank predicts that the rate of inflation will reach over 7% in spring, but hope that by raising interest rates now it will help inflation drop to their target of 2% over the second half of 2022 and during 2023.

The Bank has also said that interest rates may continue to rise over the upcoming months, but this is dependent on the economy and have cited prices of energy, wages, and the level of spending as attributing factors.

How will rising interest rates affect sellers?

Sellers may be worried that the interest rate hike might put off buyers as this means mortgage repayments could increase, with this added expense a potential deterrent to buyers. Although hiked up interest rates could make buying a house more expensive, leading property figures remain positive about the housing market’s outlook.

Tim Bannister, Rightmove’s director of property data, said: “The level of demand we’re seeing from home buyers at the start of the year suggests the rise in interest rates is unlikely to dampen the motivation to move. We’ve seen a real desire from both sellers and buyers to take action and move at the start of this year, and this is likely to outweigh the impact of an interest rate rise on house prices, at least in the short term.”

Interest rates not necessarily bad news for buyers

Although rising interest rates may give buyers second thoughts, Bannister reminds first-time buyers in particular that interest rates are still considerably lower when compared with the past. Bannister says: “For those looking to buy a first home, it’s important to remember that interest rates are still at a level well below historic norms, and there are still many competitive mortgage products out there.”

Adrian Anderson, director of mortgage brokers, Anderson Harris, echoes Bannister’s sentiments and provides an optimistic outlook for borrowers. Anderson says: “It’s not all bad news for borrowers. It’s interesting to see that demand for long-term residential fixed rates is driving lenders to offer more 10-year fixed rate products with Halifax launching a 1.68% 10-year fixed rate for homebuyers with a 40% deposit and Lloyds Banking Group an even more competitive rate of 1.66% for borrowers with a 40% deposit.”

So, despite the recent rise in interest rates, and the likelihood of further interest rate rises this year, the outlook for sellers remains positive, with the market simply taking this latest change in its stride. But the looming threat of more interest rate rises could actually work in sellers’ favour in the here and now, as it could encourage buyers to act more quickly in order to lock in favourable rates on their mortgage.

Here at Holland Properties, we have been an established estate agent since 1999 and can help you to get the most from your sale. We operate in Docklands and the surrounding areas, including Surrey Quays and Rotherhithe.

For further guidance on any part of the selling process, please contact us today. You can also request a free and instant online valuation to see how much you could sell your property in the current marketplace.