Mortgage rates increased at a record pace in 2022, with the 10-year fixed mortgage rate doubling between March 2022 and December 2022. With inflation increasing, the Bank of England introduced several bank rate hikes, resulting in higher mortgage rates. In September 2023, the average 10-year fixed rate interest rate reached 5.1 percent. As borrowing costs get higher, demand for housing is expected to decrease, leading to declining market sentiment and slower house price growth. How have the mortgage hikes affected the market? After surging in 2021, the number of residential properties sold declined in 2022, reaching close to 1.3 million. Despite the number of transactions falling, this figure was higher than the period before the COVID-10 pandemic. The falling transaction volume also impacted mortgage borrowing. Between the first quarter of 2023 and the first quarter of 2024, the value of new mortgage loans fell year-on-year for fourth straight quarters in a row. How are higher mortgages affecting homebuyers? Homeowners with a mortgage loan usually lock in a fixed rate deal for two to ten years, meaning that after this period runs out, they need to renegotiate the terms of the loan. Many of the mortgages outstanding were taken out during the period of record-low mortgage rates and have since faced notable increases in their monthly repayment. About five million homeowners are projected to see their deal expire by the end of 2026. About two million of these loans are projected to experience a monthly payment increase of up to 199 British pounds by 2026.

Due to interest rates decreasing in recent years, mortgages in the United Kingdom have become overall more affordable: In 2007, when mortgages were the least affordable, a home buyer spent on average 23.6 percent of their income on mortgage interest and 7.2 percent on capital repayment. In 2019, the year with the most affordable mortgages, mortgage interest accounted for 5.9 percent and capital repayment was 11.5 percent of their income. As interest rates increase in response to the rising inflation, mortgage affordability is expected to worsen. Though below the levels observed before 2007, the total mortgage repayment between 2022 and 2026 is expected to exceed 23 percent of income.

Policy interest rates in the U.S. and Europe are forecasted to decrease gradually between 2024 and 2027, following exceptional increases triggered by soaring inflation between 2021 and 2023. The U.S. federal funds rate stood at 5.38 percent at the end of 2023, the European Central Bank deposit rate at four percent, and the Swiss National Bank policy rate at 1.75 percent. With inflationary pressures stabilizing, policy interest rates are forecast to decrease in each observed region. The U.S. federal funds rate is expected to decrease to 3.5 percent, the ECB refi rate to 2.65 percent, the Bank of England bank rate to 3.33 percent, and the Swiss National Bank policy rate to 0.75 percent by 2025. An interesting aspect to note is the impact of these interest rate changes on various economic factors such as growth, employment, and inflation. The impact of central bank policy rates The U.S. federal funds effective rate, crucial in determining the interest rate paid by depository institutions, experienced drastic changes in response to the COVID-19 pandemic. The subsequent slight changes in the effective rate reflected the efforts to stimulate the economy and manage economic factors such as inflation. Such fluctuations in the federal funds rate have had a significant impact on the overall economy. The European Central Bank's decision to cut its fixed interest rate in June 2024 for the first time since 2016 marked a significant shift in attitude towards economic conditions. The reasons behind the fluctuations in the ECB's interest rate reflect its mandate to ensure price stability and manage inflation, shedding light on the complex interplay between interest rates and economic factors. Inflation and real interest rates The relationship between inflation and interest rates is critical in understanding the actions of central banks. Central banks' efforts to manage inflation through interest rate adjustments reveal the intricate balance between economic growth and inflation. Additionally, the concept of real interest rates, adjusted for inflation, provides valuable insights into the impact of inflation on the economy.

The benchmark interest rate in the United Kingdom was last recorded at 4.50 percent. This dataset provides - United Kingdom Interest Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

About 1.4 million households with mortgages up for renewal in the United Kingdom (UK) will face increasing monthly costs by the end of 2024 because of the aggressive mortgage interest hikes since the beginning of 2022. For about one million of these households, the increase will be between one British pound and 300 British pounds, while for 388,000 households, the increase will be higher. By December 2026, the number of households with rising mortgage payments is projected at 3.9 million. Meanwhile, about two million mortgage borrowers are expected to benefit from reduced mortgage payments by the end of 2026.

Based on an "illustrative scenario" in which the United Kingdom (UK) moves to a comprehensive free trade agreement with the European Union (EU) on the 1st of January 2021, this forecast shows the expected annual average bank base interest rate in response to the current Covid-19 pandemic. In a bid to minimize the economic effects of the Covid-19 virus, on the 19th of March 2020 the Bank of England cut the official bank base rate to a record low of 0.1 percent. This historic low came just one week after the Bank of England cut rates from 0.75 percent to 0.25 percent in a bid to prevent mass job cuts in the United Kingdom. In the current forecast scenario, bank interest rates are set to stay between 0.1 percent and 0.2 percent up to 2022.

Just as in many other countries, the housing market in the UK grew substantially during the coronavirus pandemic, fueled by robust demand and low borrowing costs. Nevertheless, high inflation and the increase in mortgage rates has led to house price growth slowing down. According to the forecast, 2024 is expected to see house prices decrease by three percent. Between 2024 and 2028, the average house price growth is projected at 2.7 percent. A contraction after a period of continuous growth In June 2022, the UK's house price index exceeded 150 index points, meaning that since 2015 which was the base year for the index, house prices had increased by 50 percent. In just two years, between 2020 and 2022, the index surged by 30 index points. As the market stood in December 2023, the average price for a home stood at approximately 284,691 British pounds. Rents are expected to continue to grow According to another forecast, the prime residential market is also expected to see rental prices grow in the next years. Growth is forecast to be stronger in 2024 and slow down in the period between 2025 and 2028. The rental market in London is expected to follow a similar trend, with Central London slightly outperforming Greater London.

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Home Equity Lending Market Size 2025-2029

The home equity lending market size is forecast to increase by USD 48.16 billion at a CAGR of 4.7% between 2024 and 2029.

The market is experiencing significant growth due to several key trends. One major factor driving market expansion is the massive increase in home prices, which has resulted in homeowners having more equity in their properties. Another trend is the rise in residential property values, leading to an increase in the number of homeowners with sufficient equity to access loans or lines of credit, with property management and digital lending playing a significant role in facilitating these transactions.
However, the lengthy procedures involved in securing these loans can present challenges for both lenders and borrowers. Despite this, the benefits of lending, such as lower interest rates compared to other types of debt, make it an attractive option for many consumers looking to finance home improvements, debt consolidation, or other major expenses. Overall, the market is poised for continued growth in the coming years.

What will be the Size of the Home Equity Lending Market During the Forecast Period?

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The market in the United States has experienced significant growth, driven by the increasing collateral value of residential real estate and the resulting equity available to borrowers. Monetary authorities' efforts to keep inflation in check and stable housing prices have contributed to this trend. Homeowners have utilized loans and lines of credit to fund various expenses, including home improvements, tax deductions, and debt consolidation.



The interest rate on these loans often remains competitive with other forms of borrowing, making them an attractive option for many. Banks and credit unions are the primary providers of these loans, offering borrowers the ability to access a lump sum amount or a revolving line of credit secured against their residence and property. Regulatory restrictions on high-interest debt and outstanding mortgages may impact the market's growth, but the demand for loans is expected to remain strong as homeowners continue to seek ways to access the value of their homes.

How is this Home Equity Lending Industry segmented and which is the largest segment?

The home equity lending industry research report provides comprehensive data (region-wise segment analysis), with forecasts and estimates in 'USD billion' for the period 2025-2029, as well as historical data from 2019-2023 for the following segments.

Source

  Mortgage and credit union
  Commercial banks
  Others


Distribution Channel

  Offline
  Online


Geography

  North America

    Canada
    US


  Europe

    Germany
    UK
    France


  APAC

    China
    Japan
    South Korea


  South America



  Middle East and Africa

By Source Insights

The mortgage and credit union segment is estimated to witness significant growth during the forecast period.

Home equity lending is a financing solution for homeowners looking to access the value of their property. Mortgage and credit unions serve as trusted providers in this market, offering various financial services including loans and lines of credit. These institutions not only offer consumer loans but also manage deposits, handle checking and savings accounts, disburse credit and debit cards, and grant house loans. Credit unions, in particular, provide personalized services with live representatives, ensuring a human touch in understanding complex financial matters.

Homeowners can secure competitive rates on loans through credit unions, making them a preferred choice over other lenders. With a strong focus on consumer protection and affordability, mortgage and credit unions are an excellent option for homeowners seeking to tap into their for renovation projects or other financial needs.

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The mortgage and credit union segment was valued at USD 82.39 billion in 2019 and showed a gradual increase during the forecast period.

Regional Analysis

North America is estimated to contribute 47% to the growth of the global market during the forecast period.

Technavio's analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period.

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The market in North America experienced notable growth in 2024, driven by the increase in home values and fewer regulations. Homeowners in Canada have been utilizing their properties as collateral for loans, with residential mortgages accounting for 74% of household debt and lines of credit for 16%. The balance of Lines of Credit (HELOC) rose by 1% to USD 128 billion in February 2022.

August 2024 marked a significant shift in the UK's monetary policy, as it saw the first reduction in the official bank base interest rate since August 2023. This change came after a period of consistent rate hikes that began in late 2021. In a bid to minimize the economic effects of the COVID-19 pandemic, the Bank of England cut the official bank base rate in March 2020 to a record low of 0.1 percent. This historic low came just one week after the Bank of England cut rates from 0.75 percent to 0.25 percent in a bid to prevent mass job cuts in the United Kingdom. It remained at 0.1 percent until December 2021 and was increased to one percent in May 2022 and to 2.25 percent in October 2022. After that, the bank rate increased almost on a monthly basis, reaching 5.25 percent in August 2023. It wasn't until August 2024 that the first rate decrease since the previous year occurred, signaling a potential shift in monetary policy. Why do central banks adjust interest rates? Central banks, including the Bank of England, adjust interest rates to manage economic stability and control inflation. Their strategies involve a delicate balance between two main approaches. When central banks raise interest rates, their goal is to cool down an overheated economy. Higher rates curb excessive spending and borrowing, which helps to prevent runaway inflation. This approach is typically used when the economy is growing too quickly or when inflation is rising above desired levels. Conversely, when central banks lower interest rates, they aim to encourage borrowing and investment. This strategy is employed to stimulate economic growth during periods of slowdown or recession. Lower rates make it cheaper for businesses and individuals to borrow money, which can lead to increased spending and investment. This dual approach allows central banks to maintain a balance between promoting growth and controlling inflation, ensuring long-term economic stability. Additionally, adjusting interest rates can influence currency values, impacting international trade and investment flows, further underscoring their critical role in a nation's economic health. Recent interest rate trends Between 2021 and 2024, most advanced and emerging economies experienced a period of regular interest rate hikes. This trend was driven by several factors, including persistent supply chain disruptions, high energy prices, and robust demand pressures. These elements combined to create significant inflationary trends, prompting central banks to raise rates in an effort to temper spending and borrowing. However, in 2024, a shift began to occur in global monetary policy. The European Central Bank (ECB) was among the first major central banks to reverse this trend by cutting interest rates. This move signaled a change in approach aimed at addressing growing economic slowdowns and supporting growth.

Mortgage interest rates in Europe soared in 2022 and remained elevated in 2023. In many countries, this resulted in interest rates more than doubling. In Denmark, the average mortgage interest rate rose from 0.67 percent in 2021 to 4.98 percent in 2023. Why did mortgage interest rates increase? Mortgage rates have risen as a result of the European Central Bank (ECB) interest rate increase. The ECB increased its interest rates to tackle inflation. As inflation calms, the ECB is expected to cut rates, which will allow mortgage lenders to reduce mortgage interest rates. What is the impact of interest rates on homebuying? Lower interest rates make taking out a housing loan more affordable, and thus, encourage homebuying. That can be seen in many countries across Europe: In France, the number of residential properties sold rose in the years leading up to 2021, and fell as interest rates increased. The number of houses sold in the UK followed a similar trend.

Mortgage interest rates worldwide varied greatly in 2024, from less than four percent in many European countries, to as high as 44 percent in Turkey. The average mortgage rate in a country depends on the central bank's base lending rate and macroeconomic indicators such as inflation and forecast economic growth. Since 2022, inflationary pressures have led to rapid increase in mortgage interest rates. Which are the leading mortgage markets? An easy way to estimate the importance of the mortgage sector in each country is by comparing household debt depth, or the ratio of the debt held by households compared to the county's GDP. In 2023, Switzerland, Australia, and Canada had some of the highest household debt to GDP ratios worldwide. While this indicator shows the size of the sector relative to the country’s economy, the value of mortgages outstanding allows to compare the market size in different countries. In Europe, for instance, the United Kingdom, Germany, and France were the largest mortgage markets by outstanding mortgage lending. Mortgage lending trends in the U.S. In the United States, new mortgage lending soared in 2021. This was largely due to the growth of new refinance loans that allow homeowners to renegotiate their mortgage terms and replace their existing loan with a more favorable one. Following the rise in interest rates, the mortgage market cooled, and refinance loans declined.

Between January 2018 and February 2025, the United Kingdom's consumer price inflation rate showed notable volatility. The rate hit its lowest point at 0.5 percent in August 2020 and peaked at 9.6 percent in October 2022. By September 2024, inflation had moderated to 2.6 percent, but the following months saw inflation increase again. The Bank of England's interest rate policy closely tracked these inflationary trends. Rates remained low at 0.5-0.75 percent until April 2020, when they were reduced to 0.1 percent in response to economic challenges. A series of rate increases followed, reaching a peak of 5.25 percent from August 2023 to July 2024. The central bank then initiated rate cuts in August and November 2024, lowering the rate to 4.75 percent, signaling a potential shift in monetary policy. In February 2025, the Bank of England implemented another rate cut, setting the bank rate at 4.5 percent. Global context of inflation and interest rates The UK's experience reflects a broader international trend of rising inflation and subsequent central bank responses. From January 2022 to July 2024, advanced and emerging economies alike increased their policy rates to counter inflationary pressures. However, a shift began in late 2024, with many countries, including the UK, starting to lower rates. This change suggests a potential new phase in the global economic cycle and monetary policy approach. Comparison with other major economies The UK's monetary policy decisions align closely with those of other major economies. The United States, for instance, saw its federal funds rate peak at 5.33 percent in August 2023, mirroring the UK's rate trajectory. Similarly, central bank rates in the EU all increased drastically between 2022 and 2024. These synchronized movements reflect the global nature of inflationary pressures and the coordinated efforts of central banks to maintain economic stability. As with the UK, both the U.S. and EU began considering rate cuts in late 2024, signaling a potential shift in the global economic landscape.

In January 2025, global inflation rates and central bank interest rates showed significant variation across major economies. Most economies initiated interest rate cuts from mid-2024 due to declining inflationary pressures. The U.S., UK, and EU central banks followed a consistent pattern of regular rate reductions throughout late 2024. In early 2025, Russia maintained the highest interest rate at 21 percent, while Japan retained the lowest at 0.5 percent. Varied inflation rates across major economies The inflation landscape varies considerably among major economies. China had the lowest inflation rate at 0.5 percent in January 2025. In contrast, Russia maintained a high inflation rate of 9.9 percent. These figures align with broader trends observed in early 2025, where China had the lowest inflation rate among major developed and emerging economies, while Russia's rate remained the highest. Central bank responses and economic indicators Central banks globally implemented aggressive rate hikes throughout 2022-23 to combat inflation. The European Central Bank exemplified this trend, raising rates from 0 percent in January 2022 to 4.5 percent by September 2023. A coordinated shift among major central banks began in mid-2024, with the ECB, Bank of England, and Federal Reserve initiating rate cuts, with forecasts suggesting further cuts through 2025 and 2026.

In 2024, the annual inflation rate for the United Kingdom was 2.5 percent, with the average rate for 2025 predicted to rise to 3.2 percent. The UK has only recently recovered from a period of elevated inflation, which saw the CPI rate reach 7.3 percent in 2023, and 9.1 percent in 2022. Before 2022, the inflation rate was at its highest in 2011 when it reached 4.5 percent, and was lowest in 2015 when an annual inflation rate of zero percent was recorded. Inflation has been surging in the UK since late 2021, and reached a 41-year-high of 11.1 percent in October 2022. Since that recent peak, inflation has gradually subsided, and was four percent in January 2024. Inflation down but not out in 2024 Although there are some positive signals regarding UK inflation decelerating throughout 2023, prices are still rising at quite a fast rate, especially in certain sectors. Food inflation, for example, only fell below double-figures in November 2023, and was still rising by 6.9 percent in January 2024. As of that month, however, alcohol and tobacco prices were rising faster than any other sector, with an inflation rate of 12.4 percent. Additionally, underlying core inflation, which measures prices rises without food and energy, is slightly above the headline inflation rate, and was 5.1 percent as of the most recent month. With some aspects of inflation seemingly becoming embedded in the UK economy, this will likely prolong the current Cost of Living Crisis engulfing UK households. Inflation crisis across in the world in 2022 The UK has not been alone in suffering from runaway inflation over the last few years. From late 2021 onwards, various factors converged to encourage a global acceleration of prices, leading to the ongoing inflation crisis. Blocked-up supply chains were one of the main factors as the world emerged from the COVID-19 pandemic. This was followed by energy and food inflation skyrocketing after Russia's invasion of Ukraine. Central bank interest rates were raised globally in response to the problem, possibly putting an end to the era of cheap money that has defined monetary policy since the financial crash of 2008.

From 2003 to 2025, the central banks of the United States, United Kingdom, and European Union exhibited remarkably similar interest rate patterns, reflecting shared global economic conditions. In the early 2000s, rates were initially low to stimulate growth, then increased as economies showed signs of overheating prior to 2008. The financial crisis that year prompted sharp rate cuts to near-zero levels, which persisted for an extended period to support economic recovery. The COVID-19 pandemic in 2020 led to further rate reductions to historic lows, aiming to mitigate economic fallout. However, surging inflation in 2022 triggered a dramatic policy shift, with the Federal Reserve, Bank of England, and European Central Bank significantly raising rates to curb price pressures. As inflation stabilized in late 2023 and early 2024, the ECB and Bank of England initiated rate cuts by mid-2024, and the Federal Reserve also implemented its first cut in three years, with forecasts suggesting a gradual decrease in all major interest rates between 2025 and 2026. Divergent approaches within the European Union While the ECB sets a benchmark rate for the Eurozone, individual EU countries have adopted diverse strategies to address their unique economic circumstances. For instance, Hungary set the highest rate in the EU at 13 percent in September 2023, gradually reducing it to 6.5 percent by October 2024. In contrast, Sweden implemented more aggressive cuts, lowering its rate to 2.25 percent by February 2025, the lowest among EU members. These variations highlight the complex economic landscape that European central banks must navigate, balancing inflation control with economic growth support. Global context and future outlook The interest rate changes in major economies have had far-reaching effects on global financial markets. Government bond yields, for example, reflect these policy shifts and investor sentiment. As of June 2024, the United States had the highest 10-year government bond yield among developed economies at 4.09 percent, while Switzerland had the lowest at 0.69 percent. These rates serve as important benchmarks for borrowing costs and economic expectations worldwide.

In 2024, the gross domestic product (GDP) of the United Kingdom grew by 0.9 percent and is expected to grow by just one percent in 2025 and by 1.9 percent in 2026. Growth is expected to slow down to 1.8 percent in 2027, and then grow by 1.7, and 1.8 percent in 2027 and 2028 respectively. The sudden emergence of COVID-19 in 2020 and subsequent closure of large parts of the economy were the cause of the huge 9.4 percent contraction in 2020, with the economy recovering somewhat in 2021, when the economy grew by 7.6 percent. UK slips into recession in late 2023 In the last two quarters of 2023, the UK economy shrank by 0.1 percent in Q3 and by 0.3 percent in Q4, plunging the UK into recession for the first time since the COVID-19 pandemic. Even before this latest recession, however, the UK economy has been struggling with weak growth. In the eight quarters between 2022 and 2023, the economy grew in just half of them, falling in three, and stagnating in one. As the UK gears up for a likely general election in 2024, the economy has consistently been seen as one of the most important issues to people in Britain, ahead of health, immigration and the environment. As for which political party would handle the economy better, the ruling-Conservative party have trailed the Labour Party on this issue in polls since October 2022. High inflation persisting longer than expected One of the main factors that explains the UK's economic woes recently is rising prices. UK inflation accelerated sharply from late 2021 onwards, and reached a peak of 11.1 percent in October 2022. Unfortunately for UK residents, wage growth has only recently caught up with inflation, with wages in real terms falling throughout for twenty months between November 2021 and June 2023. By January 2024, inflation had fallen to the more modest rate of four percent, but getting inflation down to such levels came at a price. The Bank of England raised interest rates throughout 2022 and 2023, which certainly played a part in the UK's weak economic performance during that time.

Bank Lending Rate in the United Kingdom remained unchanged at 8.50 percent in February. This dataset provides - United Kingdom Prime Lending Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

United Kingdom 10Y Bond Yield was 4.81 percent on Thursday March 27, according to over-the-counter interbank yield quotes for this government bond maturity. UK 10 Year Gilt Bond Yield - values, historical data, forecasts and news - updated on March of 2025.

Traditional banks in the United Kingdom (UK) had a much higher interest income than digital banks in 2024. According to Statista Financial Market Insights, the net interest income of the traditional banking industry in the UK amounted to roughly 150.74 billion U.S. dollars. In contrast, digital banks had a net interest income of 106.32 billion U.S. dollars. However, according to Statista, the net interest income of traditional banks will decrease in the following years, while digital banks' will increase.

The graph presents special interest e-commerce revenue growth in the United Kingdom in 2017, and provides a forecast thereof until 2022. The special interest segment in the UK is expected to show a revenue growth of 7.7 percent in 2018. An overview of all Digital Markets can be found here.

Statista’s Digital Market Outlook offers forecasts, detailed market insights and essential performance indicators of the most significant areas in the “Digital Economy”, including various digital goods and services. Alongside revenue forecasts for 50 countries worldwide, Statista offers additional insights into consumer trends and demographic structure of digital consumer markets.