Do interest rates impact property transactions?

With the Bank of England’s Monetary Policy Committee cutting interest rates from 5.25% to 5% at the start of August, there may be more changes to come. Most of us associate interest rates with the relative cost of borrowing and saving money. However, the reality is that interest rates can impact many areas within society. Are property transactions one of the affected areas? This question will be answered below, along with the implications for buyers and sellers entering the conveyancing process.

 

Interest rates and real estate transactions

In short, yes, interest rates do impact property transactions. Understanding this link is vital for investors and homeowners to make informed decisions. It might also be a factor in deciding when is the right time to buy a home.

Firstly, the fact that interest rates influence the cost of borrowing money means that they impact mortgage loans. Low interest rates result in lower costs for financing a mortgage, making homes more accessible. On the other hand, higher interest rates increase the cost of borrowing, potentially leading to a cooling down of the housing market.

The relationship between property and interest rates can also be influenced by changes in the housing market. Changes to demand and supply levels can then be the dominant factor. For instance, even if interest rates are low, high demand for properties might keep prices high. So while interest rates will impact how easy it is to get a mortgage that works for your property, market forces might have an impact on the nature of the transaction.

The final aspect of interest rates to consider is that they affect mortgage payments. As a result, changes in interest rates directly impact the purchasing power of property buyers. Periods of low interest may also present an opportunity for homeowners to refinance their mortgages. This process can allow you to save money over time by reducing the amount paid through the mortgage every month.

 

Other factors which can affect property transactions

Completing a property transaction is a unique process that can be influenced from many different angles. Whether you’re looking to buy or sell, you’re an experienced investor or a first time buyer, residential or commercial, it’s crucial to establish all the factors at play. This will help you establish a timeline for the transaction and accurately plan for the future. Other key factors which can impact property transactions include:

• Employment and income levels.
• Broad economic conditions.
• Housing inventory.
• Location.
• Property features and condition.
• Conveyancing legal support.

For our breakdown of an example conveyancing process, read ‘So what exactly happens when you’re buying a property?’.

 

Reliable residential and commercial property conveyancing

Toomey Legal are a Licensed Conveyancer committed to providing first-class services to our clients. One way we make sure nothing is missed, is by understanding how external factors like interest rates can impact your property purchase or sale. When you have us supporting your property transaction, you receive regular updates throughout the process so you’re always kept in the loop. Contact us to get started.