By Siham Ben Amor – Managing Director, WER Investments Ltd
Interest rates have always been a key player in the property market but in today’s climate, they’re not just a background influence. They are the main character.
Over the past 18 months, the London property market has undergone a seismic shift, with rising interest rates becoming one of the most significant forces reshaping investor behavior, buyer sentiment, and market dynamics.
As Managing Director of WER Investments Ltd, a real estate investment consultancy in London, I’ve witnessed firsthand how these rate changes are rewriting the rules of engagement for homeowners and investors alike.
🔍 A Quick Look at the Numbers Since late 2022, the Bank of England has steadily increased the base rate in a bid to control inflation. From historic lows of 0.1% in 2021, the base rate surged to 5.25% by mid-2024, the highest level in over a decade.
According to Savills UK, average London house prices have seen a modest year-on-year decrease of around 2.7% but the impact isn’t uniform. Prime London property opportunities continue to attract demand and remain relatively stable, while outer boroughs and first-time buyer hotspots are experiencing slower sales and price corrections.
🏡 For Homeowners: The Squeeze Is Real Higher mortgage costs are perhaps the most immediate consequence. A homeowner with a £500,000 mortgage at 1.5% interest in 2021 would have paid approximately £1,730/month. Today, at 5.5%, that monthly cost has surged to over £3,000.
This has led to a lock-in effect: homeowners with low fixed rates are hesitant to move, reducing supply in the market. At the same time, buyers are exercising more caution, leading to extended selling timelines and increased price negotiations.
However, it’s not all doom and gloom. Sellers willing to price realistically and present properties well are still achieving strong outcomes, especially in desirable postcodes and well-connected commuter zones.
💼 For Investors: A Time to Rethink Strategies Higher interest rates have significantly impacted buy-to-let yields and loan affordability. Many landlords with leveraged portfolios have exited or are considering selling, particularly those operating in tighter-margin areas.
Yet, as is often the case in property, disruption creates opportunity.
✅ Cash buyers and institutional investors now enjoy increased negotiating power. ✅ Rental demand in London has surged Knight Frank reported a 15.4% rise in average rents year-on-year, driven by limited stock and rising interest in renting over buying. ✅ Emerging areas like Barking, Thamesmead, and parts of South London are gaining attention for their strong rental yields and future regeneration potential.
For those working with a property investment company in London like WER Investments Ltd, this climate offers a chance to identify undervalued assets, pivot towards value-add strategies, or explore joint ventures that maximize returns. Many savvy investors are also exploring HMOs and regeneration zones to balance risk and reward.
⚖️ Balancing Risk and Opportunity Whether you’re a first-time buyer, existing homeowner, or investor, the current market requires strategic thinking.
Pros:
- Buyers now have more negotiating power.
- Investors with capital can access better deals and higher rental yields.
- Long-term fundamentals of London property remain strong.
Cons:
- Higher borrowing costs reduce affordability.
- Market uncertainty can delay decision-making.
- Exit strategies need to be more carefully planned.
At WER Investments Ltd, we advise clients to assess risk tolerance, exit plans, and market timing carefully. Diversification and flexibility are key in navigating this evolving environment.
📈 What Comes Next? There’s growing speculation that we may see interest rate cuts in 2025, as inflation continues to cool and economic stability improves. If that happens, demand could rebound quickly especially in areas that have seen price adjustments.
But for now, London’s property market belongs to the well-informed and the well-prepared.
💬 Your Turn: What’s Your Outlook? Do you see today’s market as a challenge or an opportunity?
🔗 Let’s discuss. Whether you’re an investor, homeowner, or buyer, I’d love to hear your thoughts in the comments. 📩 Connect with me to explore how WER Investments can help you navigate this changing landscape.
