PROPERTY PREDICTIONS

What does the Bank of England rate rise mean for house prices?

THE Bank of England (BoE) hiked its base rate to 3..5% today - the highest level in 14 years.

It increased its rate from 3% to 3.5% - and is the ninth time in a row that BoE has raised rates to tackle soaring prices.

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House prices have been affected my recent interest rate risesCredit: Alamy

It follows the biggest single hike from 2.25% to 3% in November.

While that's good news for savers who might get a good deal on their nest egg, it typically means millions of mortgage owners will see their monthly repayments pushed up.

Not only that, but loans and credit cards will most likely be more expensive too.

Often, high street banks will up their interest rates when the BoE hikes the base rate.

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The BoE said inflation is expected to continue to fall gradually over the first few months of 2023.

It has reduced its inflation forecasts by 0.75 percentage points on the back of government energy support.

But what does it mean for house prices?

The effect of the latest interest rates on markets is far from certain and no one can predict what will happen.

But experts have weighed on what BoE's latest action could mean.

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Managing director of estate agents Barrows and Forrester, James Forrester, commented: “While a Christmas interest rate increase is as desirable as a pair of socks from your aunty, the silver lining to today’s latest hike is that this should hopefully be the peak, with less chance of a further increase on the cards for 2023."

"Should this be the case, the New Year should bring a far more settled outlook for the UK property market, as we adjust to a new normal following a turbulent few months.”

Rising mortgage interest rates have seen potential home movers hold off and wait to see what happens before buying up.

This can lead to the market cooling where reduced demand sees house price growth slow or prices start to fall.

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Nine interest rates rises in a row by the BoE has meant mortgage rates rising too.

The average rate when the BoE base rate was at a record low of 0.1% was around 2.34% this time last year.

The mini Budget in September pushed up mortgage rates by far more which has started to be reflected in the property market.

Home loan rates hit a 14-year after the market turbulence but have since fallen back.

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According to MoneyFacts, rates have fallen back below 6% for the first time in two months.

The average two-year fixed deal is 5.84% and the average rate sits at 5.67% for a five year term.

Chris Hodgkinson, managing director at House Buyer Bureau, Chris Hodgkinson, said; "Unfortunately, the short term consequence of this decision will be thousands stretched even thinner due to the increased cost of their mortgage, with many more homebuyers choosing to sit tight and put off their purchase until 2023, at the very least."

"This will mean more sales falling through and a further reduction in market activity, which is sure to bring a further decline in house prices.

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"As a result, we can expect the downward trends that have already emerged in recent months to continue well into the new year.”

There are several different measures of house prices with the recent mortgage market turbulence only just stating to be reflected in the property market.

According to Halifax, house prices fell by 2.3% in November, the biggest monthly drop in over a decade.

The bank's index showed annual house price growth slowed to 4.7%, from 8.2% in October.

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It means the average UK house price was £285,579, down from £292,406, a drop of more than £6,000.

But according to the latest data from the Office for National Statistics, house prices increased by 12.6% from September to October.

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk

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