By Robert Lazarus, sales director
The Bank of England has raised the base rate from 0.25% to 0.5%. The Bank’s monetary policy committee was split seven to two. Mortgage lenders are now expected to follow suit with small increases to their lending rates. House prices in 2017 have tightened up so it’s still a great time to buy with the fixed rates very competitive.
What the industry needs to ensure, is that it works to stem any knock to confidence amongst consumers that this announcement brings. Simply hearing news of a rate increase will lead some people to reconsider their financial and property decisions and whilst this is understandable in some respects, these decisions should only ever be made based on personal circumstances and with at least a medium, if not long, term view.
Although the change is very small, it could have a disproportionate impact on many, especially first-time buyers and sellers, who have told us they have high loan-to-value mortgages and/or other loans. The impact on the wider market may be more limited now bearing in mind the higher proportion of homeowners with fixed-rate mortgages and/or those who have built up substantial equity from previous house price rises.
Although the psychological impact of the Bank of England’s rise may be unhelpful in terms of wider economic confidence, today’s increase is unlikely to impact heavily on the housing market. There are some 3.7m households on a standard variable rate or tracker mortgage, so their monthly bills are likely to increase.
Moreover, a 0.25% increase in rates is likely to have a modest impact on most borrowers who are on variable rates. For example, on the average mortgage, an increase of 0.25 per cent would increase monthly payments by £15 - equivalent to £180 per year.