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UK Interest Rates: How Have They Changed Over the Years?

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    A Closer Look at the UK Interest Rates History

    The base rate has risen to curb inflation following various extraneous world events such as the COVID pandemic, Kwasi Kwarteng’s disastrous mini-budget and the ongoing war in Ukraine.

    In turn, these interest rates have led to an increase in mortgage rates in the UK. This slowed housing market growth considerably, especially when compared to substantial growth in 2022. As such, property prices dropped, but rental demand soared, resulting in higher rental costs than usual. This has seen an upturn in real estate investing within the UK.

    However, since August 2023, inflation has fallen twice in a row. As such, the Bank of England has now halted interest rate hikes. Since inflation dropped, mortgage rates have also followed suit. Fixed-rate mortgage deals fell, while variable-rate deals have stayed the same.

    While many people have some concerns over the interest rate rise, the early signs show that the rise has peaked, and mortgage rates may improve over the next year.

    But how did these current base rates compare to historical ones?

    Let’s take a look at those previous interest rate hikes in better detail and, hopefully, put the current economic situation into context.

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      UK Interest Rates Chart

      This UK interest rates chart covers the base rate fluctuations from 1975 to the present day.

      DateInterest Rate Percentage
      3-Aug-235.25
      22-Jun-235
      11-May-234.5
      23-Mar-234.25
      2-Feb-234
      15-Dec-223.5
      3-Nov-223
      22-Sep-222.25
      4-Aug-221.75
      16-Jun-221.25
      5-May-221
      17-Mar-220.75
      3-Feb-220.5
      16-Dec-210.25
      19-Mar-200.1
      11-Mar-200.25
      2-Aug-180.75
      2-Nov-170.5
      4-Aug-160.25
      5-Mar-090.5
      5-Feb-091
      8-Jan-091.5
      4-Dec-082
      6-Nov-083
      8-Oct-084.5
      10-Apr-085
      7-Feb-085.25
      6-Dec-075.5
      5-Jul-075.75
      10-May-075.5
      11-Jan-075.25
      9-Nov-065
      3-Aug-064.75
      4-Aug-054.5
      5-Aug-044.75
      10-Jun-044.5
      6-May-044.25
      5-Feb-044
      6-Nov-033.75
      10-Jul-033.5
      6-Feb-033.75
      8-Nov-014
      4-Oct-014.5
      18-Sep-014.75
      2-Aug-015
      10-May-015.25
      5-Apr-015.5
      8-Feb-015.75
      10-Feb-006
      13-Jan-005.75
      4-Nov-995.5
      8-Sep-995.25
      10-Jun-995
      8-Apr-995.25
      4-Feb-995.5
      7-Jan-996
      10-Dec-986.25
      5-Nov-986.75
      8-Oct-987.25
      4-Jun-987.5
      6-Nov-977.25
      7-Aug-977
      10-Jul-976.75
      6-Jun-976.5
      6-May-976.25
      30-Oct-965.94
      6-Jun-965.69
      8-Mar-965.94
      18-Jan-966.13
      13-Dec-956.38
      2-Feb-956.63
      7-Dec-946.13
      12-Sep-945.63
      8-Feb-945.13
      23-Nov-935.38
      26-Jan-935.88
      13-Nov-926.88
      16-Oct-927.88
      22-Sep-928.88
      5-May-929.88
      4-Sep-9110.38
      12-Jul-9110.88
      24-May-9111.38
      12-Apr-9111.88
      22-Mar-9112.38
      27-Feb-9112.88
      13-Feb-9113.38
      8-Oct-9013.88
      6-Oct-8914.88
      8-Sep-8913.75
      4-Sep-8913.88
      31-Aug-8913.84
      25-May-8913.75
      25-Nov-8812.88
      25-Aug-8811.88
      8-Aug-8810.88
      21-Jul-8810.38
      7-Jul-889.88
      24-Jun-888.88
      10-Jun-888.38
      3-Jun-887.88
      17-May-887.38
      8-Apr-887.88
      17-Mar-888.38
      1-Feb-888.88
      3-Dec-878.38
      4-Nov-878.88
      23-Oct-879.38
      6-Aug-879.88
      8-May-878.88
      28-Apr-879.38
      18-Mar-879.88
      9-Mar-8710.38
      15-Oct-8610.88
      23-May-869.88
      18-Apr-8610.38
      11-Apr-8610.88
      19-Mar-8611.38
      15-Jan-8612.38
      26-Jul-8511.38
      11-Jul-8511.88
      19-Apr-8512.38
      28-Mar-8512.88
      20-Mar-8513.38
      28-Jan-8513.88
      14-Jan-8511.88
      23-Nov-849.5
      19-Nov-849.75
      5-Nov-8410
      17-Aug-8410.5
      16-Aug-8410.75
      9-Aug-8411
      8-Aug-8411.5
      11-Jul-8412
      6-Jul-8410
      29-Jun-848.88
      10-May-849.06
      14-Mar-848.56
      7-Mar-848.81
      3-Oct-839.06
      10-Aug-839.56
      9-Aug-839.44
      14-Jun-839.56
      13-Jun-839.81
      14-Apr-8310.06
      13-Apr-8310.31
      15-Mar-8310.56
      12-Jan-8311
      26-Nov-8210
      2-Nov-829.13
      1-Nov-829.38
      12-Oct-829.63
      30-Sep-8210.13
      29-Sep-8210.25
      28-Sep-8210.38
      27-Sep-8210.5
      27-Aug-8210.63
      26-Aug-8210.88
      25-Aug-8211
      24-Aug-8211.13
      17-Aug-8211.25
      16-Aug-8211.38
      4-Aug-8211.5
      2-Aug-8211.56
      30-Jul-8211.63
      29-Jul-8211.75
      28-Jul-8211.81
      26-Jul-8211.94
      21-Jul-8212.06
      13-Jul-8212.13
      12-Jul-8212.25
      9-Jul-8212.5
      8-Jun-8212.63
      20-Apr-8213.13
      19-Apr-8213
      16-Apr-8213.13
      10-Mar-8213.25
      25-Feb-8213.63
      22-Feb-8213.81
      22-Jan-8213.88
      21-Jan-8214
      20-Jan-8214.13
      19-Jan-8214.25
      18-Jan-8214.31
      4-Dec-8114.38
      25-Nov-8114.56
      9-Nov-8114.63
      6-Nov-8115.06
      28-Oct-8115.13
      12-Oct-8115
      15-Sep-8114
      25-Aug-8112.69
      11-Mar-8112
      25-Nov-8014
      3-Jul-8016
      15-Nov-7917
      13-Jun-7914
      5-Apr-7912
      1-Mar-7913
      8-Feb-7914
      9-Nov-7812.5
      8-Jun-7810
      15-May-789
      8-May-788.75
      12-Apr-787.5
      9-Jan-786.5
      28-Nov-777
      17-Oct-775
      10-Oct-775.5
      19-Sep-776
      12-Sep-776.5
      15-Aug-777
      8-Aug-777.5
      16-May-778
      2-May-778.25
      25-Apr-778.75
      18-Apr-779
      12-Apr-779.25
      31-Mar-779.5
      21-Mar-7710.5
      10-Mar-7711
      3-Feb-7712
      31-Jan-7712.25
      24-Jan-7713.25
      10-Jan-7714
      29-Dec-7614.25
      20-Dec-7614.5
      22-Nov-7614.75
      7-Oct-7615
      13-Sep-7613
      24-May-7611.5
      26-Apr-7610.5
      8-Mar-769
      1-Mar-769.25
      9-Feb-769.5
      2-Feb-7610
      26-Jan-7610.5
      19-Jan-7610.75
      5-Jan-7611
      29-Dec-7511.25
      1-Dec-7511.5
      17-Nov-7511.75
      6-Oct-7512
      28-Jul-7511
      5-May-7510
      21-Apr-759.75
      24-Mar-7510
      10-Mar-7510.25
      17-Feb-7510.5
      10-Feb-7510.75
      27-Jan-7511
      20-Jan-7511.25

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      Base Rate UK: Pre-20th Century

      • 18th-century interest rates rose from 4 to 5% in 1719. However, they remained relatively stable throughout numerous financial crises like the South Sea Bubble burst of 1720.
      • 1822 saw the Bank of England lower the rate to 4%.
      • The 19th century saw more interest volatility, where figures would fluctuate between 4 and 10%.
      • The panic of 1857 started when the New York base of an Ohio investment company ceased payments after a cashier embezzled funds from the company. This caused ripples across the international market.
      • Britain received a significant number of American exports and held a large amount of American debt. Foreign debt had increased by $263 million in the previous three years. Once the Ohio investment company failed, so did numerous establishments in Liverpool, Glasgow and London. Subsequently, interest rates rose to around 10%.
      • The 1866 panic – a financial downturn caused by the failing finance firm Overend, Gurney & Company – saw the Bank of England raise interest rates to 10% again.
      • However, the financial boom of earlier years ensured that other banks could rise to prominence and help stabilise the economy.
      • The 1873 panic saw the country’s economic leadership weaken again. In 1869, the Suez Canal opening meant British overseas trade – which could not sail through the canal – suffered as a result. The ‘73 panic lasted until 1879. However, interest rates rose to 7% at the start of the panic and continued to fluctuate between 2% and 7% until 1930, bottoming out at approximately 2%.

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        Interest Rates UK: 20th Century Leading Up to the ‘70s

        • Over a 20-year period following WWII, the global population grew by 30%. This was known as the baby boom.
        • At that time, tech and manufacturing developed during the war found their way into the everyday economy. This included cars and household items, such as washing machines. These advancements ensured the boom period of the 1950s.
        • Once the baby boomers entered the national workforce in the 60s and 70s, more people were working and buying things. Inflation rose to the highest level ever during this time – reaching 24.2% in 1975.

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          The Base Rate During the 70s and 80s

          • Margaret Thatcher’s government raised interest rates to 17%. This was to combat a steadily rising inflation rate. Interest has never been higher in the UK.
          • In the last five years of the 1980s, UK house prices increased by a staggering 109%. This is the most substantial five-year increase in UK history.
          • This measure reduced inflation but also had a negative knock-on effect on manufacturing exports.
          • The rate dropped to 9% in 1982.
          • Interest rates rose again in the late 1980s as the country tackled house price rises. The rate rose to 14.88% in 1989.
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          The 1990s Interest Rates and the Establishing of the Bank Interest Rate

          • 16th September 1992 is known as Black Wednesday. On this day, the UK withdrew from the European Exchange Rate. This sent the base rate up to 12% from 10%. John Major then said he would raise the rate further to 15% to encourage Sterling purchases. When this did not happen, interest rates returned to 10%.
          • Tony Blair became prime minister in 1997. He and Gordon Brown gave control of the base interest rate back to the Bank of England.

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          UK Base Rates in the Early 2000s

          • During 2003-2007, interest rates rose from 3.5% to 5.75% to temper an over-inflating UK economy.
          • The 2008 global financial crisis kept interest rates low. The base rate fell to its lowest level in three centuries. The rate fell to 0.5% in 2009. They fell again to 0.25% in 2016, which was great for the property market. However, they began to rise slightly in 2017 before hitting 0.75% in the summer of 2018.

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          UK Interest Rates: 2020 Pandemic Crisis and Beyond

          • Following the 2020 COVID-19 pandemic, the Bank of England lowered the base rate interest to a historic low of 0.10%. This meant home buyers with fixed-rate mortgages enjoyed the most attractive mortgage payments in the history of the financial system.
          • In November 2021, the cost of living forced inflation up to 5.1%, an increase from the previous month’s 4.2% figure. This compelled the Monetary Policy Committee to vote for the first interest rate rise in three years, increasing it to 0.25%
          • As inflation continued its surge, the MPC raised the interest rate to 0.5% in February 2022. This was the first back-to-back interest rate increase since the Tony Blair days.
          • They raised the interest rates again to 0.75%, which saw them reach their highest level since the start of the COVID-19 pandemic.
          • May 2022 saw those rates rise to 1%, marking the fourth increase since December 2021. This was the highest interest rate since 2009 and an attempt to quell the speed of rising prices.
          • Throughout the rest of the year, the MPC continued to raise rates as inflation continued to grow. In August, the rate jumped from 0.5% to 1.75% – the largest jump in nearly 30 years.
          • By November 2022, the interest rate was 3.00%. The HM Land Registry House Price Index recorded a record-high average property price of £292,187.

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            What Is the Interest Rate Today and What Does It Mean for the Property Market?

            As you can see, interest rates have fluctuated immensely throughout UK history.

            It is worth mentioning that property investment price growth has slowed dramatically since the highs of November 2022 – so to have interest rates.

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            What Is the UK Base Rate Right Now?

            As of September 2023, the Bank of England base rate stands at 5.25%.

            As interest rates and inflation rates rose, people became less inclined to sell their properties. As such, property prices fell. However, rental demand also increased.

            This means the property market is primed for buy-to-let investors. The tenant base is actively looking for properties and is willing to pay extra for top properties.

            According to the Homelet Rental Index, the annual rental growth is 10.30%. Meanwhile, property price growth – according to the UK House Price Index – is at 1.70%. These figures suggest yields are going in the right direction. Higher rental yields also mean greater capital appreciation for buy-to-let investors.

            Growth is still visible with property investment in Manchester and property investment in London in 2023, this is likely due to the rental demand.

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              What About UK Bank Interest Rates and Mortgage Interest Rates in the Future?

              We cannot predict what will happen with interest rates in the future. However, experts suggest that interest rates have now peaked and may stay the same until 2024. With inflation coming down slowly, we may see interest rates fall sooner rather than later. Questions such as is property a good investment ? are often heard within the investor market place when interest rates fluctuate.

              When Will the MPC Meet to Discuss the Current UK Interest Rate Again?

              The MPC is set to meet two more times in 2023 – on the 2nd of November and the 14th of December.

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                How Does the BOE Base Rate Affect House Prices and UK Mortgage Interest Rates?

                Typically, when inflation and interest rates fall, people are more willing to spend money on goods and services. They are also more likely to dip into the property market again. Mortgage rates will eventually become favourable and more affordable. This will send property prices upwards once again.

                While prices may not have bottomed out just yet, 2023 could potentially be one of the last times to buy property at such a low value.

                While mortgages are still expensive, the market is primed for cash buyers and those willing to take a chance on off-plan property investment.

                This is where RWinvest can help.

                We specialise in off-plan property investment. We have properties across the UK strategically placed in up-and-coming areas with serious capital growth potential. View some of our off plan properties for sale in 2024 for some inspiration.

                When you invest in off-plan properties, you get a discount from the developer. As such, the property will be well below market value. However, once the property is ready for tenants, it will be worth so much more. In addition, off-plan properties will also have state-of-the-art facilities and attractive EPC energy efficiency ratings, appealing to a wider tenant base.  Why not learn about some of the tax breaks for buy to let landlords with our handy guide.

                With property prices still down, this may be one of the last chances to enjoy huge discounts on desirable luxury properties.

                Intrigued? Contact RWinvest today for more information!

                Disclaimer
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                Author

                Dale Barham

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                Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.

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