A 13th consecutive Base Rate rise: what next for sellers?

Q2 2023

Following the recent base rate hike by the Bank of England and subsequent government intervention to try and reassure mortgage holders, Strutt & Parker’s Matt Henderson and Kate Eales share their thoughts alongside Mike Boles of SPF Private Client mortgage brokers.


Matthew Henderson

Associate Director, Residential Research

+44 (0) 7818 254017

On Thursday 22nd June, the Bank of England increased the base rate of interest by 50 points to 5.0% in a bid to curb inflation. The latest and 13th consecutive rate rise impacts borrowers, most notably mortgage holders.

On Friday 23rd June, the Chancellor announced new support measures for mortgage holders. The first is that anyone worried about mortgage repayments can call their lender for information and support, without any impact on their credit score. Customers also won’t be forced into repossession within 12 months of any first missed mortgage payment, while those approaching the end of a fixed rate deal will be given a chance to lock in a deal up to six months ahead as well as applying for a better deal if there is one until their new term stars.

Another new agreement between the FCA and government has been announced; permitting customers to switch to an interest-only mortgage for six months, or extend their mortgage term to reduce monthly payments and switch back to their original term within the first six months. Both of these options will not require an affordability check or impact an existing credit score. For more information visit Gov.uk.

Matt Henderson, associate director Residential Research at Strutt & Parker explains The backbone of the UK’s economic problems is core inflation. As CPI stayed flat this month, core inflation has risen to a 31 year high prompting a 0.5% rise to the base rate, taking it to 5.0%. For the roughly two-thirds of buyers who use debt, or those having to re-mortgage, the latest rises presents a larger financial challenge. It adds further pressure on the housing market following the last few weeks of mortgage product turbulence.

“Whilst the bank rate is being increased to try and halt inflation, it is still expected to be reduced once inflation is back to a manageable level. This 13th consecutive rate rise comes off the back of historically low mortgage rates; in the short-term the market is adjusting to new conditions while many lenders have priced in this latest rise in recent weeks. As such, house buyers will already be taking stock and cutting their cloth accordingly in order to be able to transact with confidence.”

Kate Eales, head of Regional Agency at Strutt & Parker continues “The latest rate rise is an expected however unwelcome event for leveraged home owners and buyers across the UK as the Bank of England goes further to try and curb inflation. The picture has shifted from the optimism of the early May market, to cautiousness as buyers revise budgets and await stability.

“That being said, prime markets are less likely to be impacted due to the lower reliance on debt, with sentiment likely to be the main barrier to transactions. As the market continues to adjust, it's important for active buyers and sellers to seek trusted and reputable advice."

Mike Boles, head of Private Office at SPF Private Clients adds, “Borrowers are understandably concerned as to whether they will be able to afford their mortgages. Those on base-rate trackers will find their mortgage rate increase by a further 50 basis points; for example a £250,000 25-year mortgage on a 4.5% rate will see this increase to 5% which translates into monthly payments rising by £71.

“The accumulation of 13 successive rate rises is significant. A borrower with a £250,000 mortgage on a tracker pegged at 1 per cent over base rate will have seen their monthly payments rise from £943 in December 2021, when base rate rose from 0.1% to 0.25%, to £1,611 today.

“This latest rate rise has already been priced into fixed-rate mortgages, with rates edging upwards in recent weeks. Our advice is to plan ahead as much as possible and take action now. Rates can be booked up to six months before you need them for peace of mind; if rates have fallen by the time you come to remortgage, you should be able to opt for a cheaper deal.

“If you do not need to remortgage for a year or two, put yourself in a stronger position by paying down other debt and considering overpaying on your mortgage, if possible, to lessen the pain when the time comes.”