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How rising interest rates affect buyers, landlords and homeowners

By Sophia Wood-Burgess

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Big news in the Capital: we’ve reached the 6th consecutive rate increase to combat rising inflation. What should buyers, homeowners and landlords do? Here are the facts, the predictions and things to consider from the experts at Foxtons and Alexander Hall.

The story so far

The base rate has risen to 1.75% to kerb inflation, which the Bank of England predicts, “will hit 13% later this year” (Bank of England). It is the largest increase in 27 years, and it might seem intimidating for anyone with a mortgage or who has plans to apply for one.

The first thing to remember is that the base rate is still at a historic low. During the first increase, we published an article, Interest Rates are likely to rise, but don’t panic, which provided some context, “in the 1980s, the base rate ranged between 10% and 15%. Rates decreased gradually into the single digits in the 1990s, and then, with the global recession in 2008, the [Bank of England] had its most sudden drop – all the way down to 2.0%.”

Foxtons is partnered with mortgage broker Alexander Hall, and they told us, “Those with tracker or variable rate mortgages will see immediate increases in their payments. There will also be a notable impact on Help to Buy affordability and Buy to Let rental calculations, due to higher rates of stress testing. It is vital that buyers and landlords are speaking to a trusted mortgage advisor on this. At Alexander Hall, we’re helping buyers ensure all affordability requirements have been met and keeping them notified of any changes as they arise.”

Information for your situation:

First-time buyer | Buyer | Landlord in a Buy to Let purchase | Landlord | Homeowner

Meeting the Help to Buy deadline

As we’ve discussed in our article, UPDATE: Help to Buy – act before October, the Help to Buy scheme is ending quite soon. If you’ve been planning to buy through this scheme, it's time to act.

Read more information about the scheme, or try the Help to Buy Calculator for yourself.

As the team at Alexander Hall said, the base rate may increase your monthly repayments, and in doing so, may affect the affordability of the mortgage you’re applying for. It’s important that:

1. You can meet the affordability requirements

2. You have enough time to pass any stress testing before the Help to Buy deadline

We can help you beat the deadline for Help to Buy. View available London New Builds to get your property search started, and get in touch with Alexander Hall to get your mortgage application underway. We'll hold a Help to Buy Event in September, where you can get your questions answered by experts and explore new developments. Register your interest in Help to Buy on My Foxtons, and we'll be sure to send along the details of the event.

Our New Homes Managers selected some of our great Help to Buy properties – available now. Click your favourite to see its details and book a viewing:

Viceroys Court, Harrow

1 and 2 bed apartments | £360,000 - £585,000

A brand new development with beautiful views to enjoy from the private balcony or terrace, as well as underfloor heating and open plan interiors.

See the development.

Clarendon, Harringay

1 bed apartments | £530,000 - £545,000

Several of the stunning apartments in this new development are available with Help to Buy. Besides the great interior design, views across Alexandra Park, a bustling community hub and onsite amenities like a gym and cafe make this development very appealing.

See the development.

Brentwood Acres, Brentwood

1 and 2 bed apartments | £290,000 - £405,000

In this Brentwood development, you'll find both 1 and 2 bedroom apartments available with Help to Buy. They boast bright interiors, high-specification finishes and private outside spaces.

See the development.

Aspyre, Chelmsford

1 and 2 bed apartments | £250,000 - £360,000

This riverside development has a large selection of 1 and 2 bed apartments available with Help to Buy. The surroundings are gorgeous, as it's situated within the Chelmer and Blackwater Navigation conservation area. Each beautiful apartment comes with private outside space and parking, and it's minutes away from the train station.

See the development.

Royal Arsenal Riverside, Woolwich

1 bed apartments | £510,000 - £590,000

Within the Royal Borough of Greenwich, this development offers glamorous living spaces and plentiful amenities (like the residents' spa and gym). It's very well connected, with the Elizabeth Line, Thames Clipper Pier, National Rail and the DLR line all nearby.

See the development.

New Market Place, East Ham

3 bed apartment | £528,000

This is a spacious 3 bed apartment in a popular new development, with a fully fitted kitchen and bathroom. It includes a private balcony, as well as access to the residents' roof terrace. It's situated in an East London regeneration hot spot, with easy access to the East Ham Underground Station.

See the apartment.

Popes Lane, Ealing

2 bed apartment | £575,000

If the large developments aren't your style, here's a 2 bed, first floor flat available with Help to Buy. It's right across from Gunnersbury Park, and it has been refurbished to an excellent standard.

See the apartment.

Wimbledon Grounds, Summerstown

1 bed apartment | £465,000

This sleek, brand new development is near Wimbledon Village, chic cafes and plentiful park lands. The apartment is stylishly designed, with fitted wardrobes in the bedroom and a fully integrated kitchen. Communal amenities include a residents' roof garden.

See the apartment.

Or, you can browse homes for sale with Help to Buy.

Buying still makes sense

Do you continue to pay rent each month or take the leap and buy? With the base rate on the rise, this question may be weighing on those who’ve been considering a move. However, monthly outgoings will still likely be less on a mortgage than renting, and in, say, 35 years’ time, you’ll own a property with no mortgage to pay. If homeownership is your goal, you don’t have to put it on hold.

Buyers, landlords and homeowners: what about a fixed rate?

Homeowners and landlords who have multiple years left on their fixed rate (which won’t change with the base rate increase) are probably breathing a sigh of relief right now. But what if you're reaching the end of your fixed period? Also, a number of lenders increased their standard variable rates (SVRs) in line with the previous base rates and may be preparing to do so again. If you’re on your lender’s SVR, should you consider moving to a fixed rate?

There are some advantages to getting a fixed rate now. There are further Bank of England meetings in September, November and December, with some market forecasts expecting further increases to the base rate by the end of the year. Securing a fixed rate now, ahead of potential further increases, can give you assurance over your payments for the next two, three, five, seven or ten years. It may save you a significant sum of money per month if you’re currently on your lender’s SVR. A fixed rate can, however, be a challenge if you choose to sell the property in the short term, as you’ll need to pay early repayment charges.

Try your new interest rate against the Alexander Hall mortgage repayment calculator here.

If you're considering Buy to Let

Row of housesRental demand is high in London. If you’re considering using a Buy to Let mortgage for your next investment property, this base rate increase may affect you too. It's important to be prepared.

The base rate increase may raise the rate of your monthly repayments, and in doing so, may affect the affordability of the mortgage you’re applying for. Before you submit that application, you need to be sure you’ll be able to afford the monthly repayments.

It's important to have a specialist mortgage adviser who understands Buy to Let mortgages thoroughly, like the Specialist Lending Team at Alexander Hall. This team of experts will help you produce a strong application for the most suitable mortgage for you situation.

You can do this.

Buyers, homeowners and landlords can still achieve their property goals. The increased rate is still comparatively low, and there's help available to ensure your mortgage application's success. If you want insight from Foxtons or Alexander Hall, get in touch:

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