Are you wondering “What does high interests mean for moving home?”. If so, you’re certainly not alone. This is a very common query right now, with thousands of people wondering if soaring mortgage interest rates will stop them from buying the home of their dreams. Read on to find out more.

What are interest rates when buying a house?

Interest rates when buying a house refer to the percentage charged by lenders on the amount borrowed for a mortgage. When you take out a mortgage, you borrow an amount of money from a lender in order to finance the purchase of your home. The lender charges you interest on the loan, which is expressed as an annual percentage rate (APR). Lenders have hiked their rates in recent months, which is a response to the Bank of England raising interest rates in an attempt to reduce the UK’s annual inflation rate.

5 ways high interest rates can affect home buyers

There are a few different ways in which high interest rates can affect you if you’re buying a house. Keep reading to learn what high interests could mean for you when moving home.

Increased borrowing costs

Increased borrowing costs are one of the biggest problems for home buyers faced with high interest rates. Home buyers are likely to pay more in interest on their mortgage loans, making borrowing more expensive and increasing the overall cost of homeownership. If you’ll be applying for a new mortgage to buy a house, you’ll need to budget for higher monthly costs.

Affordability challenges

Higher interest rates can affect the affordability of homes. A significant increase in mortgage rates leads to steeper mortgage payments for home buyers. This makes it harder for some to qualify for loans or realistically afford the monthly payments. For some people, this means they would either need to delay their plans to buy a home or opt for a cheaper property to satisfy affordability requirements set by lenders. Buyers are likely to find that high interest rates limit their purchasing powers, potentially significantly.

Stricter lending standards

Higher interest rates can lead to stricter lending standards. This can make it harder for some buyers to qualify for a mortgage or reduce the amount they can borrow. Lenders assess a borrower’s debt-to-income ratio, their creditworthiness, and their ability to make the monthly mortgage payments when deciding whether to offer a mortgage, running through everything with a fine tooth comb. They may use increased risk assessment to check that buyers can comfortably handle the increased monthly mortgage payments, and may require more stringent proof of income and evidence of financial stability.

Increased savings returns

We’ve talked a lot about the downsides of high interest rates, but there is a benefit. When the Bank of England raises the rate, those who have savings accounts or other investments could see higher returns on their savings. Although this is unlikely to help if you’re planning a house right away, it could be helpful if you’re looking to build up a larger deposit for a purchase down the line.

A decrease in house prices

It’s possible that higher interest rates can impact buyer demand, leading to a decrease in house prices. When rates increase, many buyers might choose to postpone their house purchase due to being more cautious in their borrowing. This can result in a reduction in overall demand for homes, forcing sellers to drop their asking prices in some cases. Nationwide Building Society said that house prices fell by 3.5% in the year to June 2023, which is the biggest annual fall since 2009. Additionally, Zoopla’s May house price index revealed that UK house prices had fallen 1.3% over the last six months.

Should I buy a house when interest rates are high?

If you’re wondering “What does high interests mean for moving home?”, there’s a good chance that you’re considering buying a house right now. You may also be wondering if it’s a good idea or if waiting to see if rates go back down is a more sensible decision. The truth is that deciding whether to buy a house when interest rates are high is a personal choice that depends on your specific circumstances and your financial goals.

Whilst higher interest rates can impact the affordability of a mortgage, you could also benefit from lower house prices. You should also consider your long-term plans. If you plan to live in the house for a lengthy period, high rates are likely to have less of an impact. Over time, as you make payments and potentially remortgage in the future, the effect of those high rates can lessen. If you’re not sure whether to buy a house right now, it’s best to speak with a financial advisor.

Home removals in Uppingham

Now you know the answer to the question “What does high interests mean for moving home?”, you may be feeling clearer about how to proceed in the property market. If you do decide to buy your next home and need a removals company in Uppingham, we’re here to assist. Metro Removals is one of the leading removal firms in the area, serving people from all walks of life. We can make moving house a smooth and stress-free process from start to finish.

Contact us

For home removals in Uppingham, get in touch with Metro Removals. You can reach us by calling 01536 688 149 (Kettering) or 01858 790 000 (Market Harborough). Alternatively, send us a quick message via our website and we’ll get back to you right away. We’ll book a free pre-move survey so that we can find out more about your requirements and provide you with a competitive quote for our services.