Prominent figures within the property industry have continued to share their views on the potential impact of the interest rate rise.
Following a decision made by the Bank of England’s Monetary Policy Committee last week, interest rates grew for the first time in a decade, rising by 0.25% up to 0.5%. The aim of this is to reduce the rate of inflation which have largely been attributed the UK’s decision to leave the European Union.
As far as the property market is concerned, the rise is expected to have little impact. Whilst the increase is likely to affect those on variable rate mortgages, those paying fixed monthly payments are unlikely to feel an immediate impact.
Prior to the increase in base rate, reports suggested that first-time buyers were not deterred from trying to access the property ladder, with these thoughts being echoed across the industry.
Martin Bikhit, Managing Director of Kay & Co stressed that the increase had been largely anticipated, with any impact observed being minimal.
“We expected that after 10 years of bank rates falling that at some point they will rise again so the announcement from the Bank of England is not a surprise.
“I am sure that for first time buyers and those trying to get a foot on the ladder that this change will have a marginal impact on them, however I don’t expect to see any impact this will have on the London property market.
“As rates continue to rise, we may see some effect but this will be a gradual change over a long time period. It is expected that rates will rise to 2% by 2021.”
Also taking this view was Doug Crawford. As well as stating that banks and brokers will continue to provide consumers with the best offers, the CEO of MyHomeMove also highlighted that the rise could be beneficial for those saving for a deposit.
“Although this is the first rate rise by the Bank of England in a decade, mortgage holders should be encouraged to remember that 0.5% is still a historically low rate and is simply a return to the rate that was in place in July 2016. For people saving a deposit to purchase a home, the rate rise should be welcomed news, as they should see a slightly better return on their savings.
“For the housing market, the developments and risk controls that Lenders have in place will continue to protect investment in housing and ensure that the market remains stable for the foreseeable future.
“As always, Banks and Building Societies will continue to offer their new and existing customers highly competitive rates and brokers will continue to find their customers the best deal for them. When taking out a mortgage, borrowers should always think long-term when finding the best deal for them, taking into account possible rate rises and the financial implications this could have. As an industry we need to ensure that consumers have all the information they need to make an informed choice about which mortgage deal is best for them.”
Stating that the rate rise is likely to have a positive impact on the property market was Guy Gittins. The Head of Sales at Chestertons highlighted that it could lead to a rise in the value of the pound, and in turn, build buyer confidence.
“Today’s very small increase in the Bank of England base rate is actually good news for the housing market. The knock-on effect will most likely be that Sterling value will increase, potentially demonstrating that we are in a stronger position today than we have been in recent times and giving added confidence to overseas buyers currently looking at opportunities in within the UK.
“The housing market has already demonstrated resilience in the face of the snap general election and EU vote, so this is unlikely to have a significant effect. Whilst it does mean that monthly mortgage payments will rise marginally for those on variable rate mortgages, the degree of impact on individual households depends on the size of the mortgage.
He also went on to acknowledge that whilst there may be an increase in mortgage payments for some, this is unlikely to have a huge effect on annual outgoings.
“For the vast majority, although inconvenient, the small rise will be manageable, equating to approximately £30-£60 more per month on a £300,000 mortgage. It will also benefit those with savings who will likely start to see higher returns.
“[Most] mortgage lenders have already withdrawn lower rate products and relaunched new mortgage deals ahead of this increase, with the remaining lenders set to reprice following this announcement.”
