Rightmove is warning that it’s “highly likely” interest rates will rise in the near future.
The portal believes this now seems inevitable “as the Bank of England seeks to control resurgent inflation.”
It says this means there’s a small window of opportunity for buyers and sellers to get deals done ahead of the BoE acting.
Rates have been low for well over a decade; they dropped from 5 0 to 0.5 per cent after the 2008 financial crisis; then, after the Brexit vote destabilised the economy in 2016, the rate halved again to 0.25 per cent.
Then came Covid. Last month the BoE Monetary Policy Committee voted unanimously to keep the interest rate at 0.1 per cent, the record low it was set at early in the pandemic in spring 2020.
Rightmove predicts the likely rate rise later this year or early next year will slow the housing market but not stop its momentum.
The portal’s forecast comes after its latest housing market report saying asking prices have surged past last month’s record and jumped by an average of 1.8 per cent or £5,983 this month.
This is the highest percentage monthly rise at this time of year since October 2015.
The number of sales being agreed was up 15.2 per cent in September, versus 2019’s ‘normal market’ comparison.
In addition, this is the first time since March 2007 that Rightmove has recorded a ‘full house’, with all market sectors and all regions of Britain having hit new record price highs in the same month.
It says the continued fast turnover of property for sale and a window of opportunity to buy before a potential interest rate rise seem to have overcome the final expiry of all stamp duty incentives and are keeping activity robust.
Tim Bannister, Rightmove’s director of property data, says: “Although more properties are coming to market, the level is still not enough to replenish the stock that’s being snapped up.
“The stock shortages started after the first lockdown, and they look set to continue with the underlying housing market fundamentals remaining strong, and an additional incentive to buy and fix your mortgage interest rate before a widely expected rate rise.
“Mortgage interest rates are lower than they have ever been before and lenders are keen to lend in a competitive market, with employment and wage growth also robust. The number of sales agreed continue to be strong despite the end of the stamp duty incentives.”
The Bank of England lending statistics for September show that net mortgage borrowing was £4.8 billion in September, up from £3.0 billion in August.
Mortgage approvals for house purchase increased further to 91,500, the highest since September 2007. Effective mortgage interest rates were broadly unchanged.
With inflation pressures beginning to build, the prospect of higher interest rates becomes more likely. For a generation that has only known a world of extraordinarily cheap money the change will come as something of a shock.
Official forecasters predict that the biggest mortgage rate rises will come in 2023, the Office for Budget Responsibility (OBR) saying that inflation is likely to speed up to 4% next year.
In response, it expects a rise in the Bank rate next year, and the year after, from its current record low of 0.1%.
The OBR says the Bank Rate could go as high as 3.5% if inflation goes over 5%.
Reactions to the figures recognised that whilst mortgage lending bounced up as the SDLT holiday came to an end, the prospect of higher interest rates is about to become a significant factor in the property market. And mortgage payment affordability in the face of the rising cost-of-living figures is also likely to become a more significant factor in lending criteria.