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The Bank of England’s decision to hike interest rates to a 15-year high is set to see mortgage payments rise for millions of homeowners.
On Thursday, the Bank confirmed UK rates will rise for the tenth time in a row, to 4 per cent from 3.5, in a bid to control inflation after it reached a record 11.1 per cent in October.
The Bank has faced a tough call over what approach to take, as higher mortgage costs saw the housing market suffer five successive months of falls in property prices.
The IMF reported this week the UK would be the only G7 member to see their economy go backwards this year, with a likely 0.6 per cent contraction. While this would usually lead to calls for interest rates to be cut, the current inflation rate of just over 10 per cent is pushing the Bank to act on its mandate to bring it back towards its 2 per cent target.
Below we look at how the latest interest rate increase could impact the housing market for buyers and borrowers alike.
HOUSE PRICES
After big increases in 2022, the price of the average property in January was £258,297 – down 0.6 per cent on December, and well below the £281,000 figure from last year.
House prices stalled in September, followed by monthly falls of 1.0 per cent in October, 1.2 per cent in November and 0.3 per cent in December.
Further falls are likely now the Bank of England has approved an interest rate rise for the tenth time in a row, as it will likely push mortgage rates up further.
Higher mortgage rates tend to push