Published on 23.06.2023

Mortgage interest rates in the UK has risen to 6%

The average mortgage rate in the UK for a two-year deal has risen to 6%. This will lead to a decrease in purchasing power and demand in the real estate market. If the situation does not change, then the purchase of real estate should be seen as a way to save money. However, the "turbulence" in the British mortgage market makes it impossible to predict anything with high accuracy.

The size of the average mortgage rate to 6% for a two-year fixed deal has risen after the UK government's decision not to support loan holders financially. Previously, the rate of 6% was last fixed in November 2008. The mortgage rate has also risen for five-year deals to 5.67%.
The UK’s Prime Minister, Rishi Sunak, says that the main goal of the government now is to struggle with high inflation. If its growth can be stopped, mortgage rates will also fall.

“That's why the first priority I set out at the beginning of the year was to halve inflation because that's the best and most important way that we can keep costs and interest rates down for people”, - says the Prime Minister.

Rising mortgage rates will have a direct impact on rising payments. According to the data of the Resolution Foundation think tank, the average annual mortgage payments will rise by £2,900 next year, which will lead to lower demand and stagnation in the property market.
If inflation in the UK continues to rise, it could lead to two scenarios for the real estate market. In the first case, buyer demand will fall and loans will become more expensive, in the second – the demand for housing will grow, as the purchase of real estate will be seen as a way to save money.

At the same time, house prices in Britain have fallen for the first time in 11 years. If mortgage rates rise, property values may also fall, but loan holders will have to pay more because of the increased interest rate. The cost of housing is directly affected by the term of the mortgage loan. Every fifth bank customer who takes out a mortgage indicates the term of its closure at 35 years, reducing the amount of monthly payments. However, in this case, banks are forced to raise the rate in order not to lose money.
Whether you’re looking to invest or buy a property in the UK for personal use, we’re here to help
Amit Seth
Managing Director