Are UK homeowners looking for alternative solutions amidst rising mortgage costs?
The recent announcement that the Bank of England [BoE] has raised interest rates by a quarter of a point [to 4.5%] to combat inflation, has resulted in growing concern as homeowners battle rising mortgage costs and a drop in house prices.
As it stands, there are 1.3 million households expected to reach the end of their fixed-rate mortgages before the end of this year, with a further million others forecast to face higher borrowing costs next year. With higher mortgage rates and potentially reduced property prices, many homeowners and renters may be looking for alternative housing solutions.
Here Mehran Charania, CEO of leading self storage provider, Ready Steady Store, discusses the impact of the latest BoE rate rise, how it is affecting homeowners across the UK and why self storage solutions present a viable solution:
How will the rate rise affect the property sector and how will it impact homeowners?
When interest rates rise, it can create adverse effects on the property market, typically resulting in higher mortgage payments. For first-time and other buyers this can actually impact their ability to be able to purchase a property, with many providers actually reducing borrowing amounts. For those on variable or tracker mortgage rates, a BoE rate rise immediately results in higher repayments, and with no concrete date as to when rates will fall, many homeowners are understandably feeling the pinch.
The recent BoE rate rise also impacts the buy-to-let market, with many Landlords also having to fork out for higher mortgage repayments. As a result, it may become more challenging for tenants to afford a knock-on increase in rent payments, where many may be forced to look for smaller and cheaper alternatives.
What are the benefits of using alternative storage solutions?
With higher mortgage rates, many homeowners and renters may be looking for alternative housing solutions. One option that is often overlooked is the use of storage spaces. While not traditionally thought of as a long-term housing solution, storage spaces can provide a range of benefits for those impacted by the BoE rate rise.
Downsizing
One advantage of storage spaces is that they can provide extra room for individuals who are downsizing or facing space issues in their current residence. With the increase in mortgage rates, some property owners may choose to downsize to save money. By using storage space, property owners can rest assured that their assets are protected and conveniently stored, to save space in their smaller homes.
Temporary housing solutions
For individuals or families looking for temporary housing solutions such as short-term rentals, storage spaces can be a reliable and secure option for housing possessions – particularly when there is lack of space. Instead of dealing with the hassle of finding a new rental property or living in the midst of unpacked boxes, a storage unit can provide a temporary and safe place to store belongings until a more permanent housing arrangement has been secured.
Good time to save
Although there are many adverse potential effects from the rate rise, it is important to note that a BoE rate rise may not necessarily spell doom for the property market. While it may impact potential buyers’ affordability and the value of savings, it could also result in an increase in interest rates, making it a more attractive time for savers.
Home buyers, especially first-time buyers, may benefit from holding off purchasing a property to benefit from better interest rates for saving. This will make saving a more attractive solution for buyers in 2023, and using alternative storage solutions such as self storage, could be an affordable alternative for storing assets until the time is right to purchase.
Conclusion
