The BoE’s decision to raise borrowing costs at the quickest pace in 27 years yesterday is cutting in on the ability of buyers to afford mortgages. Pill further explained that the BOE is attempting to bring down inflation, which may increase to 13% this year.
He said, “We think there is some resilience there, and we’re not going to see the dramatic downturns we’ve seen in the past.”
There are signs that the bank’s actions are slowing down the runaway growth in property prices seen through the pandemic. Halifax, a mortgage lender, said earlier today that UK house prices fell for the first time in a year.
When asked about the impact on mortgages by the Sun newspaper after the hike, BOE Governor Andrew Bailey said, “it’s important to think about whether you will still be able to afford repayments if rates rise further.”
The slowdown is expected to mark the start of a material loss of momentum for the housing market, which boomed during the pandemic. Households across the income spectrum are now facing a brutal cost of living squeeze, with inflation set to hit more than 13% in the fall, and the strain is being made worse by sharply rising borrowing costs.
Tom Bill, head of UK residential research at Knight Frank and a real estate agent, said, “Negligible monthly declines in house price growth will get steeper. Mortgages have become noticeably more expensive in recent months, dampening demand as cheaper offers made earlier this year expire and people roll off fixed-rate deals.”