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★Why are mortgage interest rates rising?
Posted on: 31st October 2022 | Filled under: Property Market News
Written by: Mark King
Inflation causes prices of all commodities to gradually increase.
As that happens, the purchasing power of the average person dwindles, especially if income doesn’t rise at the same rate – which often it doesn’t.
Mortgage brokers, in response, have to increase interest rates to combat the hike caused by inflation. If inflation rates are high, mortgages will increase. If inflation is slow, mortgage rates might remain steady or simply rise at a much slower pace. Inflation is inevitable so it will always play a factor in causing mortgage rates to slowly go up over time.
Mortgage rates have been rising for months as central banks raise interest rates to try to get to grips with soaring inflation, they have increased sharply since September due to market fallout from the government’s mini-budget.
The last hike in interest rates came just after the Bank of England loosened its affordability rules in an attempt to make it easier for people to get on the housing ladder.
Employment rates, how much people are earning, the cost of borrowing, the number of properties on the market and the willingness to lend are the main factors that affect house prices.
Generally, when the economy is doing well, people are in work, job security is stable and wages are higher. When interest rates are low, people are also able to borrow more cheaply and providing banks are willing to lend, more people will buy.
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