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How Interest Rate Hikes Might Impact the UK Housing Market

It's the butterfly effect ...


Posted by Roger Eddowes on 05/10/2023 @ 8:00AM

The recent decision by the Bank of England to raise its base rate has stirred discussions among experts about its potential impact on the UK housing market. A panel of experts weighed in on the matter, revealing a divided opinion ...

When compared to the US and Europe, the UK seems to be lagging in its efforts to combat inflation!

When compared to the US and Europe, the UK seems to be lagging in its efforts to combat inflation!

copyright: pexels / pixabay

40% of the panellists, including academics, economists, and mortgage experts, believe that the latest base rate hike could trigger a housing market crash in the UK. They argue that the increasing interest rates might make it unprofitable for landlords in the buy-to-let market, leading them to sell their properties. This could exert downward pressure on house prices and limit options for renters.

"Some even predict a potential real-terms crash
of 20%-30% in house prices!"

On the flip side, 60% of the experts are optimistic, believing that the UK will dodge a housing market crash. They cite factors such as a decrease in construction activity, which could limit the supply of homes for sale, and cash-rich property investors who might buy properties during weak periods. Additionally, the recent surge in average rents could make buying-to-let more appealing.

However, the majority anticipate the base rate to reach 5.5% or higher by the end of 2023. This expectation stems from the UK's ongoing battle against inflation, which remains a significant concern. The UK's Consumer Price Index (CPI) is currently running at nearly four times the BoE's target rate of 2.0%.

"When compared to the US and Europe, the UK seems to be lagging in its efforts to combat inflation!"

Factors such as the UK's vulnerability to rising oil/energy prices and structural issues in its labour market are cited as reasons. Additionally, post-Brexit challenges and the need to reshape the UK's labour market are also contributing to inflationary pressures.

While the future remains uncertain, it's evident that the Bank of England's decisions and the broader economic landscape will play pivotal roles in shaping the UK housing market in the coming months.

Until next time ...

Business Godparent


Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more about interest rates and their effects on the UK housing market, it may be a great idea to call me on 01908 774320 and let's see how I can help.

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About Roger Eddowes ...


Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.

Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.