Big news from the capital: Sixth consecutive interest rate hike reached to combat rising inflation. What should buyers, homeowners and landlords do? Here are the facts, predictions and things to consider from the experts at Foxtons and Alexander Hall.
The story so far
The benchmark interest rate has been raised to 1.75% to curb inflation, and the Bank of England predicts that it will reach 13% by the end of the year. This is the biggest increase in 27 years and may seem scary for people with a mortgage or planning to apply for a mortgage.
The first thing to remember is that base interest rates are still at historically low levels. At the time of the first hike, we published an article titled “Interest rates may rise, but don't panic'' and “Base interest rates in the 1980s ranged from 10% to 15%.'' provided the context. Interest rates gradually fell to single digits in the 1990s, before the Great Recession of 2008 saw the sharpest decline (according to the Bank of England) to 2.0%. ” 
Foxtons works with mortgage broker Alexander Hall, who tell us: There will also be a noticeable impact on Help to Buy and Rent to Buy calculations due to increased stress testing rates. It is important for buyers and landlords to discuss this with a trusted mortgage advisor. At Alexander Hall, we help our buyers ensure they meet all affordability requirements and keep us informed of any changes that occur. ”
Information about your situation:
First-time buyers | Buyers | Buying and selling landlords | Buying and selling landlords | Home owners
Meet the help purchase deadline
As we explained in our article 'Update: Help to Buy – Take Action by October', the Help to Buy scheme is coming to an end soon. If you are planning to purchase through this scheme, please take action now.
Read more about this scheme or try our Help to Buy calculator for yourself.
As the team at Alexander Hall said, the base interest rate can increase your monthly payments, and in doing so, it can impact the affordability of the mortgage you're applying for. It is important that:
1. Can meet your affordable requirements
2. You have enough time to pass the stress test before the Help to Buy deadline.
We can help you meet your purchase help deadlines. Start your property search by viewing available London new build properties and contact Alexander Hall to start your mortgage application. We will be hosting a Help to Buy event in September. There, you can ask experts to answer your questions and explore new developments. Register your interest in Help to Buy on My Foxtons and we'll be sure to send you event details.
Our new home managers have hand-picked some of the best properties to help you buy. Available now. Click on your favorite to learn more and schedule a viewing.
Viceregal Court, Harlow
1 and 2 bed apartments | £360,000 – £585,000
A brand new development with beautiful views from your private balcony or terrace, heated floors and open plan interiors.
Check out the development.
Haringey, Clarendon
1 bed apartment | £530,000 – £545,000
Some of the great apartments in this new development are available for purchase with Help to Buy. In addition to the stunning interior design, views of Alexandra Park, a thriving community hub and on-site facilities including a gym and cafe make this development highly appealing.
Check out the development.
Brentwood Acres (Brentwood)
1 and 2 bed apartments | £290,000 – £405,000
In this Brentwood development, you'll find both one- and two-bedroom apartments with Help to Buy available. Boasting bright interiors, high-spec finishes and private outdoor space.
Check out the development.
Aspire, Chelmsford
1 and 2 bed apartments | £250,000 to £360,000
This riverside development offers a large selection of 1 and 2 bed apartments with help to buy. Situated within the Chelmer and Blackwater Waterways Reserve, the surrounding environment is spectacular. Each beautiful apartment has its own outdoor space and parking and is minutes from the train station.
Check out the development.
Royal Arsenal Riverside, Woolwich
1 bed apartment | £510,000 – £590,000
Located within the Royal Borough of Greenwich, the development offers attractive living spaces and a wealth of amenities, including a spa and gym for residents. The Elizabeth Line, Thames Clipper Pier, National Rail and DLR lines are all nearby, offering great transport links.
Check out the development.
New Market Place (East Ham)
3 bed apartment | £528,000
A spacious three-bed apartment in a popular new development, with a fully equipped kitchen and bathroom. It features a private balcony and access to the residents' rooftop terrace. Located in a regeneration hotspot in east London, with easy access to East Ham Underground Station.
Look at the apartment.
Ealing, Popes Lane
2 bed apartment | £575,000
If large developments aren't your style, we have two bed ground floor apartments available with Help to Buy. It is located directly opposite Gunnersbury Park and has been refurbished to an excellent standard.
Look at the apartment.
Somerstown Wimbledon Ground
1 bed apartment | £465,000
This sleek, brand new development is close to Wimbledon Village, chic cafes and lush parks. The apartments have a stylish design, with bedrooms equipped with wardrobes and fully integrated kitchens. There are shared facilities such as a rooftop garden for residents.
Look at the apartment.
Alternatively, you can use Help to Buy to browse homes for sale.
Still, it makes sense to buy it
Do you continue to pay rent every month, or do you want to take the plunge and buy? With base rates on the rise, this question may weigh heavily on those considering a move. However, your monthly expenses are still likely to be lower with a mortgage than with a rental, and in, say, 35 years you'll own a property without having to pay a mortgage. If homeownership is your goal, there's no need to put it on hold.
Buyers, landlords and homeowners: What about fixed interest rates?
Homeowners and landlords who still have a few years left on their fixed rate (which won't change even with base rate hikes) are probably breathing a sigh of relief now. But what if you are nearing the end of your fixed period? Many lenders have also increased their standard variable rate (SVR) in line with their previous base rate and may be preparing to do so again. If you're on a lender's SVR, should you consider moving to a fixed rate?
There are several benefits to having a fixed interest rate today. Bank of England meetings are scheduled for September, November and December, and some market forecasts predict further increases in the benchmark interest rate by the end of the year. By locking in your interest rate now against the possibility of further increases, you can guarantee your payments for the next 2, 3, 5, 7, or 10 years. If you're currently using your lender's SVR, you could potentially save a lot of money per month. However, fixed interest rates can be difficult if you choose to sell your property in the short term, as you will have to pay early repayment fees.
Test your new interest rate against Alexander Hall's mortgage repayment calculator here.
If you are considering buying or selling
Rental demand is high in London. If you're considering taking out a Buy to Let mortgage for your next investment property, this base rate increase may also affect you. It's important to be prepared.
An increase in the base interest rate can increase your monthly payment rate, which can impact the affordability of the mortgage you are applying for. Before submitting your application, you must check whether you can afford the monthly repayments.
It's important to have a specialist mortgage advisor in place who understands Buy to Let mortgages inside out, like the specialist lending team at Alexander Hall. This team of experts can help you create a strong application for the mortgage that's best for your situation.
You can do this.
Buyers, homeowners, and landlords can still achieve their real estate goals. Increases are still relatively low and there is support available to ensure a successful mortgage application. If you would like insight from Foxtons or Alexander Hall, please contact us below.
