Interest Rate Rises and Movers - What Our Survey Found
The impact of interest rate rises on people's moving plans became a major concern when the Bank of England base rate climbed sharply through 2022 and 2023. In a survey conducted by Sunny Avenue, we explored this issue, gathering insights from a diverse group of respondents. In this insight, we delve into the survey findings and shed light on the reasons behind the postponement of moving plans, as well as the resilience of the property market during uncertain times. We also include commentary from Stuart Crispe, the founder of Sunny Avenue, to provide expert analysis and perspective.
A note on timing: this survey was carried out when rates were still rising. The base rate has since peaked and begun to ease, but affordability remains stretched by historic standards, so the trade-offs movers weighed up here are still very relevant today.
At a glance
- Delayed their move
- 75%
- Would switch counties to save
- 56%
- Would use an online agent
- 72%
- Would extend the mortgage term
- 65%
The Influence of Interest Rate Rises:
According to the survey results, a striking 75% of respondents looking to move have delayed their plans due to interest rate rises. This finding underscores the impact of fluctuations in interest rates on the decision-making process of homebuyers and sellers. However, it's essential to note that despite the uncertainty, the property market in the UK remains resilient and continues to provide opportunities for homebuyers.
25% of the sample confirmed they had plans to move but have since delayed those plans due to uncertainty around interest rate rises.
How Do Interest Rate Rises Impact Homemovers?
Interest rate rises have a direct impact on mortgage repayments. When interest rates increase, it typically leads to higher borrowing costs for homeowners with variable-rate mortgages or those whose fixed-rate mortgages are up for renewal.
As a rough guide, a variable-rate mortgage rises by roughly £12 a month (about £150 a year) for every 0.25% increase in the Bank of England base rate on a modest balance, though the exact figure depends on the size of your loan. The quickest way to see the real impact on your own mortgage is to run the numbers:
Mortgage repayment calculator
Capital & interest, monthly repayment estimate
Estimate only. Your lender’s actual rate, fees and criteria will differ.
If you want to understand why your monthly figure moves the way it does, our guide on how loan-to-value can impact mortgage repayments is a useful companion.
Stuart Crispe, founder of www.sunnyavenue.co.uk: "In many scenarios, those who wished to move to upsize, simply cannot afford to do so now. Many homeowners will be questioning whether upsizing is the best option for them at the current time. Some homeowners will consider moving to less expensive towns, or even waiting and hoping for Interest Rates to fall".
What Are The Alternatives For Homemovers?
Homeowners could potentially be looking at ways to either reduce the cost of moving home or find better value in the market. Sunny Avenue considered some of the possible alternatives and put the options to the people to check the most likely.
Moving Counties
With the rise of remote work opportunities, the necessity of living near the city has diminished for many individuals. This newfound flexibility has opened doors for people to explore new counties, seeking better value for their hard-earned money. At Sunny Avenue, we conducted a survey to gauge the willingness of our sample to consider relocating to different counties in order to save money on property. The results shed light on an intriguing trend of homebuyers seeking both affordability and new experiences in their quest for the perfect home.
44% of the sampled audience confirmed they would not consider relocating to a new county to save money, whilst an impressive 56% demonstrated no loyalty when it comes to saving money.
Using Online Estate Agents
Online estate agents rocked the estate agency market by charging a fixed up-front fee for their services, instead of the traditional percentage of the sale value. This approach can save sellers thousands while still allowing them to enjoy the benefits of using an agent, such as being listed on Rightmove, Zoopla, and Prime Location. It is worth weighing this against typical estate agent fees before you decide.
We asked our sample whether they would be willing to use an online estate agent given the opportunity to save money whilst moving home.
72% said Yes. They would be willing to use an online estate agent to save money when selling a property.
This data is a strong indicator of how homemovers feel about the fees charged by traditional estate agents. Many people are starting to value the cost savings over the convenience or expertise of a local service.
Extending Mortgage Terms
Extending the term of your mortgage means you'll pay less each month, but over a longer period of time. Because you'll be paying off your mortgage for longer, you'll pay more interest and so end up paying more overall. It's an option that provides short-term relief in exchange for longer repayments. Many mortgage providers allow term extensions up to retirement age without too many questions asked, and some borrowers now consider a 40-year mortgage to bring monthly costs down. When moving home, it's a good chance to reassess your mortgage term as a way to bring your repayments back in line with your budget.
We asked our sample whether they would consider extending their mortgage term to mitigate the impact of higher interest rates.
65% of the sample would be willing to extend their mortgage term in a bid to mitigate the interest rate increases.
The data suggests a strong short-term concern for the impact of interest rate rises, with people willing to sacrifice paying a mortgage for a longer period to assist with managing costs. There may also be a lot of homeowners who may not have a choice but to act upon a measure such as extending their mortgage term.
Wait for Interest Rates to Fall
Waiting for interest rates to fall as a tactic for saving money when choosing to move home can be a consideration, but it's important to approach it with a realistic perspective. Predicting interest rate movements is challenging, and timing the market carries risks. Additionally, delaying a move based on waiting for lower rates may result in missed opportunities and potential increases in property prices. Considering long-term factors and seeking professional advice can help evaluate the viability of this strategy based on individual circumstances and market conditions. Ultimately, it is crucial to weigh the potential benefits against the uncertainties and opportunity costs involved in waiting for interest rates to decrease.
We asked our sample if they think the BOE base rate will fall back below 1% in the next 5 years.
Just 3% of our sample believe BOE base rate will fall back to below 1% in the next 5 years. 68% answered No, whilst 29% on the fence.
Confidence is low amongst homemovers to expect to see a base rate back below 1% in the next 5 years. Waiting for Interest rates to fall doesn't look like a tactic many people are willing to employ.
In conclusion, the survey results shed light on the complex dynamics between interest rate rises and individuals' moving plans. While interest rate fluctuations play a significant role in decision-making, alternative options such as exploring new counties, using online estate agents, and extending mortgage terms can offer potential solutions to mitigate the impact of rising rates.
It's crucial for homeowners to carefully evaluate their options and seek professional advice to make informed decisions that align with their financial goals and circumstances. If you are weighing up your next move, it may help to read whether it is a good time to buy a house and whether you can remortgage early to lock in a better deal.
