The Bank of England has increased its base rate from 2.25 per cent to 3.0 per cent.

This is the largest hike in interest rates in three decades, and comes after multiple recent rate rises as the BoE has attempted to curb inflation.

The director of Benham and Reeves agency in London, Marc von Grundherr, comments: “Forget Halloween, it’s the Bank of England that has just delivered the fright of the year for the nation’s homebuyers with the biggest jump in interest rates in over three decades. 

“This latest increase will also do little to revitalise the declining level of buyers entering the market, with many now finding they simply can’t afford the cost of borrowing compared to just a few short months ago.”

And in the Midlands the managing Director of Barrows and Forrester, James Forrester, says: “This latest, quite drastic hike, shows that the Bank of England have been asleep at the wheel for some time, awaking only now to the realisation that the economy is hurtling towards a sharp bend. 

“While we anticipate that the base rate will fall again come next year, we can expect market conditions to dampen over the coming months as buyers no longer have the purchasing power to pay the hefty property price premiums of the pandemic market boom, while sellers will remain stubborn in their expectations and refuse to adjust their asking price. 

“Whatever happens next, homebuyers need to wake up and smell the coffee, as high loan to value mortgages at low rates are now a thing of the past.”

Rightmove’s director of property science Tim Bannister says: “The era of historically low interest rates looks to be over, which is making it more challenging for those new first-time buyers who are stretching themselves financially to try and get out of the frenzied rental market and onto the housing ladder. However, compared to the volatility of a few weeks ago, mortgage rates have now started to stabilise and fall. As today’s rise was expected, we don’t think we’ll see any significant changes to new fixed rate deals based solely on today’s interest rate rise.

“Mortgage payments will be much more manageable for those first-time buyers who have been lucky enough to save up a bigger deposit of 25%, as they may find that monthly mortgage payments on a typical first-time buyer home are lower than their current monthly rental payments.

“It’s important to look beyond the headline numbers, because, while ‘like-for-like’ mortgage costs have been increasing, mortgage brokers and lenders will be able to help people assess the different options available to manage their costs and see if they can afford to move.”

“We were already seeing activity soften in the market since the start of the summer as rising interest rates and the cost of living combined to make it more expensive to move. Along with the political uncertainty, the sharp rise in rates has had an impact on people’s plans and demand for homes, and a number of people are choosing to wait and see what unfolds over the next few weeks and months.

“But there are thousands of different local housing markets, and various groups of people in different circumstances. Those in a fortunate position to have built up reasonable equity in their home, or who are cash buyers, appear to be carrying on with their plans to move, while those stretching themselves unfortunately may have to press the pause button for now.

“It’s worth remembering that buying a home is likely to be the biggest purchase that someone makes, and what we’re hearing from agents is that people are taking a medium to long term view when weighing up if now is a good time to move. If they know they can afford the mortgage payments and they’ve found a home they love, then they’re determined to try and make it work.”