Around 1.3 million more UK households are now facing a jump in their mortgage costs following the economic “shock” caused by conflict in the Middle East, the Bank of England has warned.
The Bank’s latest Financial Stability Report says the UK economic outlook has “deteriorated”, increasing pressure on households and businesses and leaving many London buyers reluctant to commit to major financial decisions.
In London, where property prices and borrowing needs are typically higher, the warning is adding to existing worries about affordability and long‑term debt. There are fears buyers are holding back and smaller landlords may sell up, with few new investors entering the market.
Government‑commissioned research by HMRC, analysed by Emoov, has found that nearly a quarter of private landlords (24%) plan to reduce the number of rental properties they own within the next year, rising to a third (33%) over the next five years, underscoring how fragile confidence is among smaller landlords.
Reacting to the Bank of England’s warning, London‑based property expert Nick Neale from Emoov explained, “The warning from the Bank of England will only deepen the anxiety buyers are already feeling. If over a million households are braced for higher mortgage costs, people will understandably think twice before taking on fresh debt.”
“Taken together, the Bank of England’s warning and the government’s own landlord data paint a picture of a housing market where both homeowners and landlords are being squeezed from all sides.”
Mortgage rate uncertainty will affect landlords. Nick adds, “With the Renter’s Rights Bill on the horizon, we are seeing an increasing number of landlords selling up, and smaller investors are leaving the market. New landlords are not entering the market now because borrowing costs are high and the return is not there. If mortgage costs rise for existing landlords as well, you risk even more rental stock being pulled from the market.”
He believes the combination of international instability and domestic policy change is putting significant pressure on the housing market.
“Uncertainty across the country and around the world is making people second‑guess their decisions, especially when it comes to purchasing a property. Growing economic instability, including rising unemployment, interest rate hikes and climbing inflation, means people are a lot more cautious about what the future may hold.”
Nick advises potential homebuyers and new landlords to consider affordability at all stages of buying a property.
“Buyers need to think carefully about affordability and avoid rushing into decisions. People are understandably more conscious of the costs, including the property price, legal fees and future mortgage payments. In the current climate, stress‑testing your own finances is just as important as any checks the lender carries out.”
Top 5 Tips for London Homebuyers
How households in the capital can navigate the current property market:
Check affordability first – Don’t rush into a purchase; make sure monthly costs are manageable now and if rates rise again.
Consider all costs – Include legal fees, taxes, service charges and higher household bills in London in your planning, not just the mortgage payment.
Act carefully – With market uncertainty, focus on a clear plan rather than trying to time the market or waiting indefinitely for rates to drop.
Think long‑term – Factor in potential future costs, changes to your circumstances and job security before taking on new borrowing.
Seek professional guidance – Speak to a mortgage adviser to explore your options safely and understand how different rate scenarios could affect you.
Nick concludes, “It’s a real shame that interest rates have increased again as people have put up with a high base rate for a couple of years. The situation is unfortunate for everyone, whether you are a buyer or a landlord, and global events are only adding to the pressure on UK households.”