Is a new home on the cards for you in 2022? You will likely be considering whether now is a good time to buy and what the property market will look like as we move into the new year.
Here, we summarise the mortgage forecast for 2022 and tell you everything you need to know about the shape of the property market next year.
What is the base rate and why does it matter?
Set by the Bank of England, the base rate serves as a benchmark for all borrowing. The higher the base rate, the higher interest rates. Since March 2020, the base rate has been at the very low rate of 0.1 per cent. The BoE has kept this rate low to help mitigate the economic impact of the pandemic, and voted to maintain this rate further in September 2021.
However, with inflation rising over three per cent, the Bank has warned that interest rates will need to rise soon to bring inflation back down to the two per cent target.
If the base rate increases, mortgage rates must increase too.
How much will interest rates rise in 2022?
Online property site Zoopla has predicted that interest rates will grow modestly over the course of 2022. They have projected that by the end of next year, mortgage rates will be close to three per cent.
Strong competition between mortgage lenders is expected to keep mortgage rates relatively low, despite rising inflation. More than 80 per cent of mortgages are currently agreed on fixed rates, so many homeowners with existing mortgages may not be immediately impacted by rising interest rates.
What will happen to the property market in 2022?
Zoopla’s most recent house price index has predicted that house prices will grow three per cent over the course of 2022, a decrease from this year’s six per cent. A combination of increased mortgage rates, rising living costs and higher taxes are projected to result in less houses sold next year – Zoopla predicts that there will be around 1.2million property sales in 2022, 300,000 less than in 2021.
Demand for homes is expected to remain high, which is currently 30 per cent higher than average and greatly outstripping supply.
For fee-free mortgage advice from industry experts, get in touch with the Choice Mortgage team.
Sources:
https://www.retailtimes.co.uk/what-is-the-outlook-for-uk-mortgages-in-2022/
https://www.thisismoney.co.uk/money/mortgageshome/article-10122921/House-price-growth-slow-2022.html
https://www.standard.co.uk/homesandproperty/buying-mortgages/interest-rates-mortgage-inflation-bank-of-england-b957769.html