High Interest Rates Will Hurt UK Property Market, Choke Home Buyers Out, And Drop Mortgage Transactions By 6% In 2nd Half Of 2022

Mortgage broker, Henry Dannell, reports that because of the rising interest rates, mortgage activity and transactions are expected to fall by 6% in 2022, affecting the UK property market.

The housing market be hit rather hard as loan borrowers, remortgages, and property investors are wary about applying for loans and sitting tight on whatever resources they currently have. 

Henry Dannell has analysed mortgage data from the past decade and the first half of 2022 to get a good look on how the mortgage market (and the UK property market to an extent) is reacting to the rising interest rates.

mortgage application

The firm’s research reveals that much of the mortgage markets gains peaked in 2021 coinciding with the time that the Bank of England reduced interest rates and implemented the stamp duty holiday

These let to a surge in demand in the UK property market with both first time home buyers and property investors applying for mortgages that high street lenders were only quite happy to accept and process. 

Lenders like banks and building societies processed 1.48 million mortgage transactions in 2021, an increase of 17% compared to the same period in 2020. 2021, in fact, was considered a high point in the mortgage market in the last decade. 

The trend for 2022 however is going the opposite direction. According to Geoff Garrett, director of Henry Dannell, as we head into the second half of 2022, inflation, the cost of living, coupled with the interest rates hike, we should expect a decline in mortgage applications and consequently, a decline in the UK property market as well.

Where there may be some activity would be with specialist lenders as people often turn to them in times of great need. 

Expert Opinion - Brett Alegre-Wood

The real question is how long will high interest rates prevail and how much will they affect house prices in the UK?

The government and Bank of England faces a lot of serious questions. High Inflation and Monetary Policy may dictate that rates need to go up but if the country moves towards recession can they really afford to continue to increase rates, that's the dilemma that we all will face over the next 12-24 months. 

Brett Alegre-Wood, Gladfish's MD believes that given the choice the UK government will choose to lower rates sooner and run with higher inflation than to continue to raise rates. He believes that rates are likely to top out by the end of 2022. Remember also that the UK naturally slows over the Autumn and Winter periods before bouncing back in Spring. 

If you want to know more about the UK housing market, we’ve published two videos about how interest rates and inflation are affecting the market so please check them out by clicking on the links. We’ve also posted videos about the UK recession and where the house prices are going, please check these as well. 

If you’re new to property investments or are a Gladfish client who wants more education and information about the UK property market, book a chat with us or call our team today on 02079236100.

Brett Alegre-wood
August 25, 2022

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