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Stubbornly high levels of inflation have caused the Bank of England to raise interest rates to 5%, which will have a direct impact on the property market. Interest rates have now been raised for the 13th consecutive time since 2021, and this has driven the average cost of a fixed rate mortgage deal up from 2.5% to over 6%. 

The steep rise in mortgage rates is expected to have a further dampening effect on the property market, which has been steadying up over the past few months. However, for those who can afford to make a move, it is a buyer’s market with plenty of choice still available and more negotiating room than there has been during the past few years. 

Nathan Emerson, chief executive for Propertymark, said: “It’s undisputed that homeowners and first steppers will be facing the consequences of rising interest rates as borrowing costs increase. However, with this comes a further shift towards more realistic and sustainable house prices down from the spike seen during the pandemic.”

He added: “Confidence from sellers is undeterred with our latest data showing a 70% increase in properties available for sale compared to April 2022 and in turn, this is providing buyers more room for negotiation as well as more choice.”

During a seller’s market when demand is high, you can expect to pay the asking price or even above to secure the right home for you. However, during a slower period, it is possible to have an offer accepted that is 5% or 10% lower than the asking price. There are some regional variations to this rule however, as some areas will always be in high demand.

It’s therefore important to research the area and look at average sold house prices on the street or neighbourhood where you intend to buy. If you are a seller but also want to make an onward purchase, you may have to accept less than you hoped for for your property, but this can be compensated for by cheaper house prices elsewhere. 

Matt Smith, Rightmove’s mortgage expert, said: “[April’s]  inflation figures were disappointing, however today’s Base Rate rise won’t come as much of a shock to lenders who have already been increasing their fixed-rate mortgages sharply in anticipation of today’s rise.”

He added: “The Bank appears to have opted for a larger Base Rate rise this month than some commentators predicted to try and address the underlying issues driving inflation, and it continues to forecast that inflation will drop sharply in the second half of the year.”

“Based on this message and the action taken today, we wait to see the impact this has on swap rates as this will have a direct impact on mortgage interest rates and whether or not we see further increases in the coming weeks.”

The government has announced details of a new agreement to help mortgage holders who are facing steep rises in payments this year. Measures include being able to switch to an interest only mortgage for six months, and permission to extend the mortgage term. 

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