The Bank of England have recently announced an increase in the interest base rate from 0.25% to 0.50%. This is the first increase in the interest rate for more than a decade. Some may argue that the increase is overdue, particularly those keen to see a return on savings and investments but the increase may perhaps come as a shock to those who have relied on the regularity of the rate over recent years.
What impact will this have on the housing market as a whole? Those who currently own a property and have a fixed rate mortgage will see little or no impact during their fixed term. Those with a variable rate mortgage, depending upon the size of their mortgage, will see an increase in their mortgage payments. The increase in the interest rate is slight and therefore the impact on those with a lower outstanding mortgage will be minimal.
Landlords who currently own properties which are let to tenants will presumably not require an increase in their tenant’s rent to cover such low monthly mortgage increases. This is good news for tenants, as well as property owners.
Those who are planning to purchase a property may be worried about how the interest rate increase will affect them when looking to obtain a mortgage. Of course, the mortgage lenders will have to incorporate the changes into their lending criteria on some level, however there is no doubt that the banks will continue to strive to offer good deals and competitive rates for customers. Hopefully therefore, the impact on those looking to purchase a property will be slight.
Those saving for a deposit to purchase a property will reap the benefits of the higher interest rates as they will see a slightly better return on their savings and investments. Perhaps this is the right time to start saving a deposit, particularly as further increases in the interest rate are predicted over the coming years.
The housing market has been in a good state in recent years, despite the issues faced in terms of Brexit and the announcement relating to the increase in stamp duty land tax for second homes. It would be a shame to see the market affected by this recent announcement, however this seems unlikely given the low rate of increase. It has been announced that the interest rate will most likely be increased further over the coming years but it is suggested that this will be implemented slowly, with increases being kept to a minimum where possible and in line with inflation to prevent any potential issues.
As long as we only see a steady increase in the interest rate then hopefully this can only serve to increase the value of the pound, build the economy, strengthen the housing market and thus build buyer confidence, making it an ideal time for first time buyers to venture onto the property ladder and for investors to continue in their investments.
For further information please contact Zoe Vasey on 0191 261 0096 or by email at firstname.lastname@example.org.