NIESR publishes report on impact of rising interest rates on housing costs

The National Institute of Economic and Social Research (NIESR) published a box analysis on 9 August 2023 examining the impact of rising interest rates on housing costs across the United Kingdom¹. The analysis forms part of NIESR's UK Economic Outlook Summer 2023 and was written by Max Mosley with external authors Chowdhury and Rosen¹.

The report sets out its scope as the short and long-term implications for mortgage holders, and whether any pass-through impact on renters can be observed¹. It also asks how housing costs have been affected by uncertainty, not only about the path of monetary policy but also about lending conditions and mortgage providers withdrawing a range of mortgage products¹.

The 5.5 per cent figure is given as a forecast in the report, published on 9 August 2023¹. The analysis was published under NIESR's UK Economic Outlook Box Analysis publication type and tagged Money and Interest Rates¹.

The published page does not set out the report's findings, figures or conclusions beyond the scope described above; those are contained in the downloadable spotlight document, which has not been summarised in the material available¹. No estimates of the effect on mortgage payments or rents, and no breakdown by nation or region, have been reported in the page text¹.

Why it matters for households

The analysis concerns two groups whose housing costs move with interest rates: households with mortgages, and renters¹. For mortgage holders, the questions raised are the short and long-term consequences of higher rates, and the effect of lenders withdrawing mortgage products, which affects the deals available at a given time¹. For renters, the question is whether higher rates feed through into rents¹.

The report was published against a forecast of interest rates rising to 5.5 per cent¹. It does not, in the material published, quantify what that would mean for a typical household's payments, and no such figures have been reported¹.

Background on how fixed mortgage pricing responds to gilt yields and swap costs, and on average mortgage interest rates over time, is set out in this site's guides to gilt yields and fixed mortgages and average mortgage interest, with wider coverage in the rates and economy hub.

What happens next

No next steps, follow-up publication or update date is given on the published page¹. The analysis is dated 9 August 2023 and sits within NIESR's UK Economic Outlook Summer 2023¹.