Property industry reacts to “surprise” interest rate increase

Property industry reacts to “surprise” interest rate increase

The Bank of England has increased interest rates to 0.25% from 0.1%. The decision, which caught many experts by surprise, came just after the official rate of inflation reached 5.1%, the highest rate recorded in the last decade.

But despite fears that the new Omicron COVID-19 variant will place additional pressure and uncertainty on the economy, the interest rate hike is thought to be the Bank of England’s response to mounting economic pressures driven by inflation.

Records show that the initial impact for mortgage holders will be felt by around two million borrowers on tracker or variable rates, estimated at an additional cost of £10-15 per month. But for the large majority (80%) on fixed rate products, immediate implications are unlikely, with industry experts indicating that the overall impact of the increase will not “deter” the property market.

Director of Henry Dannell, Geoff Garrett, commented:

A rise in interest rates was expected to materialise early next year but fears over spiralling inflation seem to have forced the Bank of England’s hand into a pre-Christmas increase.

This is the first time since August 2018 that the cost of money has increased but this relatively small tweak will not, in all context, deter the current ‘express train’ that is the UK housing market.

The scales remain firmly tipped in favour of UK homebuyers and despite today’s increase, there’s arguably never been a better time to get on the property ladder.”

Head of Corporate Partnerships at Sirius Property Finance, Kimberley Gates, commented:

Any increase in interest rates is always going to cause concern from homeowners who will be understandably worried about the implications it might have on their monthly mortgage payments.

However, it’s important to remember that even with today’s increase, rates remain incredibly low and so there’s certainly no reason to run for the hills.

Stress testing will have ensured that any monthly cost increase is easily stomached by the nation’s homebuyers and many more will have also locked in fixed-rate terms which they will continue to benefit from.

While there will no doubt be some reaction by lenders in line with today’s increase, it’s unlikely to dampen our appetite for homeownership and buyers will continue to benefit from some of the lowest rates seen in recent times.”

Adrian Anderson, Director of property finance specialists, Anderson Harris, commented:

With the Bank of England voting 7-2 to not raise interest rates last month but voting 8-2 today to raise them by 0.25%, it’s quite the U-turn!

A decision driven by the rise in inflation, the highest in a decade at 5.1%, this rise will come a surprise for many, especially in the face of the current Omicron crisis but for those looking to obtain a mortgage or indeed remortgage, there is no need to panic.

Most predicted a rise in interest rates in early 2022 and price changes have already been factored into many mortgage products.

Rates remain competitive and increased flexibility in lending criteria expected in 2022, there remains plenty of opportunity to secure good deals.”


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