Experts believe buyers are looking to take advantage of rising mortgage rates to buy homes in Britain. 

According to HMRC’s latest figures, September saw almost 161,000 property transactions. This is a 67.5 percent increase over the previous month. 

They also increased by 68% compared with September 2020 and 63% compared to the normal’ market average from September 2017 to 2019.

The cost of a mortgage could be set to increase, if the Bank of England base rate rises

If the Bank of England base interest rate rises, mortgage costs could increase.

Experts say the sharp rise was only partly a result of the Government’s stamp duty holiday, which has fuelled price growth of around £25,000 in the last year but finally ended on 30 September. 

It initially allowed buyers to save up to £15,000 in taxes as they did not need to pay stamp duty on the portion of their property purchase under £500,000. 

However, the September tax break would have had a less dramatic effect.

In England and Northern Ireland, it was tapered down between July and September so that buyers could only save £2,500.

The holiday was already over in Wales and Scotland, where it expired on 31 March and 30 Juni, respectively. 

Some believe that other factors are more important than the stamp duty holiday in maintaining high levels activity in the housing market, given the fact that its impact was decreasing. 

According to Lawrence Bowles (senior research analyst at Savills), there are many factors at play.

He says that there is more to this activity then a stamp duty holiday. Record-low mortgage rates, a desire for more space and a core market of unmet demand all continue to drive up transaction volumes. 

It is one of many reasons why the housing market is still hot. However, buyers have become more concerned about obtaining a low-interest mortgage in recent weeks and days. 

This is because speculation regarding a rise of Bank of England’s base rates has threatened an increase of current super-low rate.

At the moment, rates are available as low as 0.89 per cent – but they are already rising. The lowest rate available was 0.84 Percent.

After months of steady falls, major lenders like NatWest, HSBC, and Barclays have all stepped up to raise rates on some mortgages. 

Experts predict a December increase in the base rate. This is because experts believe that the threat of rising mortgage rates is the “new stamp duty holiday” and that the rush to sell before rates rise is what is keeping the housing market buoyant.

Simon Bath, chief executive officer of technology company iPlace Global that created the property advice app Moveable says: ‘We have come to another crossroads. After the stamp duty holiday, there is yet another deadline for Brits.

“It seems likely that house price will continue to rise before demand slows, as Brits race for lower mortgage rates.

Rising costs: Those buying homes have seen the typical sale price increase by £5,000 in the last month alone, according to data from the property platform Rightmove

Rising costs: Those buying homes have seen the typical sale price increase by £5,000 in the last month alone, according to data from the property platform Rightmove 

Early statistics support his price rise theory. According to Rightmove’s latest house price index, which covers the first half of October, the average house price jumped £5,000 compared to the previous month. 

Furthermore, all regions in the UK broke asking price records for their first time since March 2007.

According to the property portal, it noted that there was a continued high turnover of property for sale and an opportunity to buy before an interest rate rise. These factors seem to have overpowered the expiry of all stamp duties incentives and are keeping activity strong.

While this trend is keeping market buoyant for now it could lead to another buying frenzy. Iain McKenzie is chief executive of The Guild of Property Professionals. 

“With the demand for properties still high and a potential increase in mortgage rates on the horizon, this could create the perfect storm to see another frenzy of buying, as long the stock shortage doesn’t continue,” he said. 

There’s also the simple fact of the matter that people who failed to meet September’s stamp duty deadline are unlikely abandon their purchases. They will continue to add to the totals in the coming months. 

Others are less optimistic about the prospect of another buying boom. The base rate rise is only expected to be between 0.1 and 0.25 percent, so the difference in mortgage payments for people may be only a few pounds per year. 

For example, for someone with a £120,000, two-year fixed rate mortgage on a £200,000 home, the difference between a 0.89 per cent rate and a 1.04 per cent rate would be just over £8 a month, or just under £200 across the fixed period. 

Office for National Statistics data showing house price increases over the past 15 years

Office for National Statistics data shows an increase in house price over the past fifteen years

Mark Harris, chief executive of SPF Private Clients mortgage broker says that people will continue to move without stamp duty holidays. They will also continue to refinance homes, regardless of whether mortgage rates fall below 1% or around 2.5%.

‘Borrowers are keen to secure these historically-low mortgage rates but if the right property comes along, they are still likely to buy even if they have to pay say 15 basis points more and won’t qualify for a stamp duty holiday.’

The stamp duty holiday proved that even though you may not be saving any cash, the psychological impact of saving money can be quite powerful. 

While buyers did indeed ‘save’ up to £15,000 in tax, house price rises during the stamp duty holiday were upwards of £20,000, eclipsing the actual saving.   

The true impact of the proposed rise in mortgage rates will depend on several factors. For example, whether and when there is more clarity regarding the situation and how mortgage lenders respond to it. 

All eyes will be on the October transaction stats and house price indexes to determine if the market remains buoyant. 

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