What does rising interest rates and talk of recession mean for the Edinburgh and Lothians property market?

As ever, when it comes to local property market news and updates, Neilsons Solicitors and Estate Agents want to give informative frontline dispatches from those working at the forefront of the local Edinburgh and Lothians property market.

Whilst all in the economic garden is by no means rosy, we explain why there is no need to panic, particularly in the resilient and buoyant Edinburgh and Lothians property market.

What happened on 4th August 2022 with interest rates?

On 4th August 2022, the Bank of England increased the base rate by 0.5%, the highest it has been since 2009 and biggest incremental hike since 1995, when rates were 6%.

The rate now stands at 1.75%, in a move to curb inflationary pressure. This does signal a tightening of monetary policy, and those on variable or tracker mortgages (10% of those who have a mortgage) will experience an immediate impact.

Those on fixed rate mortgage deals (accounting for 90% of those who have a mortgage) will currently be unaffected by the interest rate increase – until it is time to remortgage.

Will this affect house prices in Edinburgh and the Lothians?

To quote Zoopla from earlier today, “Spoiler alert: no”.

It is important to remember that there is still no such thing as the “UK property market”. The UK is a patchwork of local markets each with its own unique dynamics.

The Edinburgh and Lothians market has always been one of the most resilient, in-demand and buoyant property markets in the UK.

As ESPC reported this week, selling prices continue to rise in Edinburgh and the Lothians both in the city centre and the ever-popular suburbs. Across all regions in Edinburgh and the Lothians, selling prices are up 4.8% year on year and in Edinburgh city centre alone selling prices are up 6.5% year on year.

At Neilsons, the selling prices we achieve for our clients is up 10% year on year.

There are of course economic headwinds, but we don’t see a housing crash on the horizon.

Why not, you might ask, given the rising cost of living and increase in interest rates?

We have to first look at what is happening in the local market.

A huge amount of change has occurred since the Covid-19 pandemic, with many looking to move home due to changed relationships with homes and what they need in their home environment.

The significant change locally is the size of the market.

Our current average selling time is just 13 days which means that a property placed on the market today will sell fast – but it may take many months for a purchase to be secured in this overheating and dysfunctional market.

As a result, the practice has grown up of buying before you sell. This ‘one in and one out’ property environment means that the property market stock remains at a comparatively very low level increasing demand and therefore prices.

There is therefore still a huge level of pent-up demand in the local market not all of which will be put off by increased mortgage rates and talk of recession.

The property market is also in a very different position to the only time we have witnessed property prices fall significantly locally, which was after the global financial crisis in 2008.


In 2007, more than a third of people obtaining a mortgage did not need to prove their affordability with the lender and many were getting mortgages on very low deposits. This led to prices shooting up then when mortgage availability dried up and the economy went into recession, prices fell. After that dip though, in Edinburgh and the Lothians, prices made a rebound much faster than many other areas in the UK.

Since the financial crisis in 2008, lenders have affordability criteria for all, there are much more stringent checks in place and the chances of negative equity are much lower now than they were in the past. This of course puts the market in a better position to weather higher mortgage rates and the increased cost of living.

The property market is not immune to these pressures of course, but the likelihood of price falls is much lower than in the 2008 recession.

More people have wanted to move in recent times, because of the pandemic changing work/life habits.

Before the pandemic, Zoopla advise that around 6% of owner occupiers moved house each year, this has changed in recent years to be around 22%. This is a massive increase.

Demand continuing to outstrip supply in the Edinburgh and the Lothians market can be evidenced by record levels of closing dates set. This year, 39% of properties advertised via the ESPC have gone to a closing date. This is up from 27.7% in 2020 and 35% in 2021.

Plenty of people who want to move, haven’t yet moved.

When you have people set on a move, the market will keep moving too.

Want more property market advice? Just ask Neilsons. 

Our experienced and professional Solicitors and Estate Agents are here to help you in Edinburgh and the Lothians. If you require advice, just get in touch. 

Call us on 0131 316 4444 today or book a free no obligation consultation on our website today.

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