Analysts have warned that rising mortgage rates risk bringing down buyers, and slowing runaway price growth. Several UK banks reported strong mortgage demand in their third-quarter results last week, including Santander, NatWest, and Lloyds.
Chief executive of Lloyds, Charlie Nunn was quoted in a report as saying, “The structural factors include things like relatively low unemployment and…. Low interest rates. I also include people’s housing preference in terms of moving to new locations to find more space… technical factors, in particular the stamp duty holiday.”
Markets are betting that interest rates could rise from 0.1 per cent to 1.25 per cent by the end of 2022. In response to rising inflation and in anticipation of an increase in interest rates, lenders have been raising their mortgage rates over the past few weeks. HSBC, NatWest and Barclays have increased rates on fixed-rate deals in the last week, emulating moves by Halifax, Nationwide, and Santander.
Property portal Zoopla forecasts that house prices will increase by 3 per cent next year, a far more moderate gain than the double-digit leaps seen across the UK in the past 12 months. Chief UK economist at Credit Suisse Sonali Punhani said, “There are more people who are more committed to moving home, there’s no sign of any stamp duty cliff edge at all and a lot of people have made a lot of money from their home in the last year for the first time in a long time. That’s bringing them into the market.”
