The National Association of Property Buyers (NAPB) has issued a stark warning: house prices are predicted to drop more steeply due to mortgage rates reaching a 15-year peak. Today’s reports reveal that mortgage rates have escalated to their highest rate in 15 years, causing an average two-year deal to reach 6.66%.

Jonathan Rolande from the NAPB remarks on this surge, “This is unfortunate news for nearly everyone. Homeowners on a variable rate or planning to remortgage will have to pay hundreds of pounds more each month, whereas buyers will face affordability issues and will have to scale down their expectations. Consequently, prices will face additional pressure and are likely to decline more sharply.”

Those optimistic about a swift resolution to this storm may be disappointed, as another report released today indicates this scenario is unlikely. Wages have seen record growth due to staff shortages and many individuals demanding pay rises to offset the additional living costs brought about by inflation. Rolande points out the irony that this wage growth could further stoke inflation, making future interest rate hikes increasingly probable. He warns of the advent of a ‘doom-loop,’ where inflation leads to pay increases, in turn fuelling further inflation.

“Typically, during such periods, we see widespread unemployment, which, as harsh as it may sound, can alleviate pressure on wages and inflation. However, we are not yet seeing this, suggesting turbulent times lie ahead,” says Rolande.

Rolande suggests measures ministers could take to ease the situation. “They could consider relaxing rules around Buy to Let, enabling borrowers to rent their homes as an alternative to selling. This could increase the supply of rental properties on the market. Currently, Buy to Let mortgages are more costly than homeowner loans. In certain scenarios, such as a borrower wishing to travel or move in with a partner or family, the easy ability to let could prevent forced sales and potential losses on homes. Also, mortgages often come with substantial fees which are typically added to the loan and aren’t always scrutinised by borrowers. The justification and process for determining these fees should be reviewed for fairness,” he concludes.