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Rising Mortgage Rates in Scotland: What You Need to Know

Rising Mortgage Rates

Mortgage rate increases have been a hot topic in Scotland recently, with many homeowners and potential buyers concerned about the impact of these changes on their finances. According to recent reports, mortgage rates have risen in Scotland due to a combination of factors, including changes in the Bank of England's base rate and the ongoing impact of the COVID-19 pandemic. It is important for homeowners and potential buyers to understand the reasons behind these rate hikes and the potential consequences for the housing market.


Why Are Mortgage Rates Increasing in Scotland?:

The recent mortgage rate hikes in Scotland are largely due to changes in the Bank of England's base rate. The base rate is the interest rate set by the Bank of England, which affects the rates that banks and building societies charge for loans and mortgages. In March 2020, the Bank of England reduced the base rate to a historic low of 0.1% in response to the COVID-19 pandemic. However, as the economy has started to recover, the Bank of England has signaled that it may need to raise interest rates to keep inflation under control.

In addition to changes in the base rate, the ongoing impact of the COVID-19 pandemic has also contributed to mortgage rate increases in Scotland. The pandemic has led to increased uncertainty and risk for lenders, which has resulted in tighter lending criteria and higher mortgage rates.


What Does Mortgage Rate Increases Mean?:

The recent mortgage rate increases in Scotland have significant implications for individual homeowners, buyers, and the housing market as a whole. For homeowners with variable rate mortgages, the rate hikes can result in higher monthly payments and increased overall costs. For potential buyers, higher mortgage rates may make it more difficult to afford a home, particularly in areas with already high housing costs.

In addition to the impact on individual homeowners and buyers, the mortgage rate increases may also have broader consequences for the housing market. Higher mortgage rates could lead to a slowdown in the housing market, as potential buyers may be deterred by the increased costs of borrowing.


Who is Affected By Mortgage Rate Increases?

The mortgage rate increases in Scotland will affect different groups of people in different ways.

Homeowners with variable rate mortgages will be most directly impacted, as they will see an immediate increase in their monthly payments.

Fixed rate mortgage holders will not be affected by the rate hikes until their current mortgage deal comes to an end.

Potential buyers will also be affected by the mortgage rate increases, as higher rates may make it more difficult to afford a home.

First-time buyers and those on lower incomes may be particularly affected, as they may struggle to meet the affordability criteria for a mortgage.


What To Do About Increasing Mortgage Rates:

For homeowners

If you are a homeowner with a variable rate mortgage, it is important to review your finances and budget for the increased monthly payments. You may also want to consider remortgaging to a fixed rate deal to protect yourself from future rate hikes.

For potential buyers & first time buyers

If you are a potential buyer, it is important to do your research and shop around for the best mortgage deals. You may also want to consider other options, such as shared ownership or Help to Buy schemes, which can help you get on the property ladder with a smaller deposit.

There are also resources and support available for those struggling to manage their mortgage payments. The Money Advice Service and Citizens Advice Scotland offer free advice and support for those in financial difficulty.

The recent mortgage rate hikes in Scotland have significant implications for homeowners, potential buyers, and the housing market as a whole. It is important to understand the reasons behind these rate increases and the potential consequences for your finances.

By reviewing your finances, shopping around for the best mortgage deals, and seeking support if needed, you can navigate the current market and protect yourself from future rate hikes.

For more information or help navigating the home buying process, get in touch with Burnett & Reid.