Fears of how the rise in interest rates will impact mortgages have prompted many people to put plans to move home on hold, according to new data from AA Financial Services.
A study by the AA revealed the proportion of people planning a house move in the next six months fell from 8% to 6% in the 48-hours after the Bank of England (BoE) hiked rates to 0.75%.
Throughout 2018 the number planning to move in this time had remained consistent at 8%. So the drop, said the AA, provided evidence the BoE’s 0.25% rise earlier this month had impacted the short-term decisions of potential movers.
David Searle, managing director at the AA Financial Services, said: “After years of record low interest rates, [the] rise – and indications that more is yet to come – mean the cost of buying a home is going to get more expensive.
“Given many people are moving home to save money, release equity or make their money go a bit further it seems that, for some, the reality of living with rate rises may well temper their plans to move in the short term.”
Mortgage bill rises
Analysis by Experian suggested homeowners on Standard Variable Rate (SVR) or tracker mortgages could see their bills increase by around £400 a year following the interest rate hike.
It had also noted how, as speculation mounted that the BoE would increase rates, there was a jump in consumers shopping for fixed-rate deals in a bid to shelter from a potential rise.
The AA said it wanted to get a sense of whether external events, such as an interest rate rise, shaped people’s thinking and plans. The evidence, it said, suggested there was an immediate impact.
Searle added: “Whether this is a short-term reaction or not is too early to tell, but we would expect to see more people reacting to uncertainty by putting plans on hold.
“The key issue for many now is not so much house price trends but the cost of borrowing. It is now time for those moving home to shop around for a mortgage deal that works for them and is sustainable in the longer term.”
