Interest Rate Impacts: How Recent Changes are Shaping the Northern Ireland Property Market

Published 27 Sep 2024

The Northern Ireland property market is currently experiencing the effects of rising interest rates, which have been implemented by the Bank of England as part of its efforts to manage inflation. These rate changes have had a direct impact on mortgage rates, making borrowing more expensive for property buyers, including both first-time buyers and investors.

The Current Landscape

Interest rates have increased over the past year, contributing to a rise in mortgage rates across the UK. In Northern Ireland, this has led to higher costs for prospective homebuyers. According to recent figures, average fixed-rate mortgages have become more expensive compared to previous years. For first-time buyers, who often require high loan-to-value (LTV) mortgages, this increase in borrowing costs has resulted in higher monthly repayments.

At the same time, property prices in Northern Ireland remain elevated in certain regions, which adds an additional challenge for first-time buyers. The combination of higher mortgage rates and relatively high property prices is affecting affordability, prompting some buyers to adjust their budgets or reconsider the timing of their purchase.

Changes in Buyer Activity

In response to rising interest rates, some buyers have opted to delay their property purchases or search for homes at lower price points. The slowdown in buyer activity has been more pronounced in some parts of Northern Ireland than in others, with demand varying based on affordability and regional factors. Despite these changes, areas offering more affordable housing options, such as parts of Belfast, Derry/Londonderry, and Newry, continue to see sustained buyer interest.

For investors, rising mortgage rates have impacted the buy-to-let market. Higher borrowing costs have reduced the profitability of rental investments, with some landlords increasing rents to cover the additional expenses. This has added pressure to the rental market, where supply is limited, and rental prices have been rising.

Impact on the Mortgage Market

In response to the increase in interest rates, mortgage lenders in Northern Ireland have adjusted their offerings. Some lenders have withdrawn certain mortgage products or implemented stricter lending criteria. As a result, borrowers are now faced with fewer mortgage options, and affordability assessments have become more stringent.

Tracker mortgages, which are tied to the Bank of England's base rate, have seen a rise in popularity as some buyers look to capitalise on potential future interest rate reductions. Additionally, some lenders have introduced incentives such as cash back offers and reduced fees in an effort to attract new buyers despite the higher rates.

Outlook for the Northern Ireland Property Market

The future direction of the Northern Ireland property market will depend on further developments in interest rate policy. Analysts have differing views on whether interest rates will stabilise, increase, or decrease in the near term, but current conditions suggest that borrowing costs will continue to influence buyer and investor behaviour.

First-time buyers may need to seek independent mortgage advice to fully understand the available options, while investors will need to consider the long-term impact of higher mortgage rates on their portfolios. Lenders will likely continue to adjust their offerings in response to changes in the wider economic environment.