All you need to know: When will interest rates rise in the UK? How much will the Bank of England base rate go up by in 2017?

The Bank of England is poised to raise interest rates for the first time in a decade. What would a return to 0.5 per cent base rate mean for the property market?
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Lizzie Rivera1 November 2017

The Bank of England's monetary policy committee is due to meet this Thursday, November 2, with almost all experts now predicting that they will vote through a rise in the base rate of interest, for the first time in a decade.

This would push the base rate back up to 0.5 per cent, where it had sat since March 2009, having been cut to 0.25 per cent last year in the wake of the Brexit vote.

With 43 per cent of homeowners on variable or tracker mortgages, this opens up the possibility that millions of households will see their monthly expenditure increase in the run up to Christmas.

Many of these homeowners will never have known rates to rise above the historic low of 0.5 per cent.

How much will a rise add to your mortgage?

For borrowers with a tracker mortgage linked directly to the BOE rate, for every £50,000 of borrowing on a 20-year term mortgage, an interest rate rise of 0.25% would see their payment increase by £6 per month*.

*Indicative figure, calculations based on £50,000 borrowed over a 20-year term, with mortgage interest rates changing from 2% to 2.25%.

Source: Mortgage Advice Bureau (Chloe Lewis)

So, what does this mean for the property market and what is the advice for home owners?

PROPERTY MARKET FORECAST

The forecast from Countrywide estate agents is that house prices will rise by 2.5 per cent in Londonand four per cent across the UK in 2018.

"Although there is talk of a 'London slowdown', the capital's property market has changed pace following last year's stamp duty changes and Brexit referendum," says Countrywide's research and analytics director, Johnny Morris.

Uncertainty is causing buyers to be more cautious than they have been in recent years, meaning they are now more price sensitive when it comes to moving home and are taking longer to make decisions.

The mandatory stress testing of mortgage affordability has also put a ceiling on the loan-to-value amounts buyers are able to secure.

"The upside is that the rise will come as the economy is doing better, so it suggests increased confidence in future employment and that confidence will probably feed into the market as well," says Morris.

SHOULD YOU DELAY BUYING?

The general consensus is that there's little to be gained in waiting to buy and that buyers should look for a property with a view to keeping it for the mid- to long-term.

"The combination of mortgage regulation and interest rate rises will act as a drag on house price growth, even once we have clarity over the Brexit process, so buyers will need to hold for longer to amortise the costs of moving home," says Savills head of residential research, Lucian Cook.

SELLERS MUST PRICE REALISTICALLY

It's similar advice for sellers. Owners who have made large gains during their period of ownership are unlikely to see prices rise significantly over the next year or two, according to Cook.

He says: "Sellers will need to price for today’s market, reflecting greater buyer caution given the backdrop of economic and political uncertainty."

MORTGAGE ADVICE

Even the hint of an interest rate change has already prompted big lenders including Barclays, Natwest, Nationwide, Halifax and Santander to withdraw some of the lowest rates on the market.

"A rate rise would undoubtedly have a further impact on product availability," says Chloe Lewis, business principal for the Mortgage Advice Bureau.

"For those who have been idling on a Standard Variable Rate, it really could be time to consider remortgaging, as these deals are still close to the lowest-ever levels.

"Likewise, for those nearing the end of their current fixed rate mortgage deal or who are considering new borrowing, it may pay to start the process sooner rather than later in order to secure a competitive deal."