Rising Mortgage Rates Make Home Buying Tougher, Says Nationwide

Nationwide reports that high mortgage rates are making it difficult for many people to buy homes. Even though salaries are rising, they can’t keep up with the increasing cost of mortgages. House prices are stable, but fewer people are buying homes due to high borrowing costs. Some people are switching to cash purchases.


High mortgage rates mean many people find it hard to buy homes, according to Nationwide. Even though salaries have gone up faster than house prices recently, this hasn’t been enough to balance out the higher costs of mortgages.

In June, house prices were mostly steady, with a slight increase of 0.2% from the previous month. The average house price is now £266,064.

House prices rose by 1.5% compared to last year, but the housing market activity has been flat for the past year. Transactions dropped by about 15% compared to 2019. Nationwide says the increase in mortgage rates, which started when the Bank of England raised its key interest rate in late 2021, is still affecting the market.

Robert Gardner, Nationwide’s chief economist, said mortgage rates are “still much higher than the record lows of 2021 after the pandemic.” For example, a five-year fixed-rate mortgage with a 25% deposit had an interest rate of 1.3% in late 2021, but now it’s around 4.7%. Because of this, buying a home is still hard for many people.


Nationwide’s data is based on their own mortgage lending, so it doesn’t include cash buyers or buy-to-let deals. Cash buyers make up about a third of housing sales. The higher borrowing costs have led to nearly 25% fewer mortgage transactions over the past year. Meanwhile, cash transactions for properties are about 5% higher than before the pandemic.

Across the UK, Northern Ireland saw the biggest increase in house prices, up 4.1% from a year earlier. Wales and Scotland both had a 1.4% annual rise, and prices in England went up by 0.6%. Northern regions saw bigger increases compared to the south.


Last week, some major lenders cut their mortgage rates, but home loan costs are still much higher than before the pandemic. According to Moneyfacts, the average rate on a two-year fixed mortgage deal is 5.95%, and for a five-year deal, it’s 5.53%.

People are now looking at the Bank of England’s Monetary Policy Committee (MPC) to see if they will lower interest rates at their next meeting on 1 August. At the June MPC meeting, policymakers suggested that a rate cut might happen next month. Sarah Coles, head of personal finance at Hargreaves Lansdown, said, “Buyers might be more confident when the Bank of England cuts rates. This could happen in August, but we might have to wait until the autumn.” However, she also said that we shouldn’t expect big drops in mortgage rates overnight.

The Bank of England said that about three million households will see their mortgage payments go up in the next two years. These are homeowners who got mortgage deals before the Bank started raising rates in 2021. Most of these deals will end before 2026. For a typical household looking for a new deal, monthly mortgage payments are expected to go up by about £180, or 28%. For around 400,000 households, monthly payments could jump by 50% or more.


In May, the number of approved mortgages dropped slightly to 60,000 from 60,800 in April, according to Bank of England figures. The amount borrowed through mortgages also fell sharply to £1.2 billion in May, from £2.2 billion the month before, but this doesn’t include people mortgaging with the same lender.


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