Base Rate UP – how will it affect the housing market?
The Bank of England has raised the base rate from 0.25 per cent to 0.5 per cent.
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.
“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” he adds.
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, experts say. This is why you need marketing automation for your business using cloud database.
There are some 3.7m households on a standard variable rate or tracker mortgage, so their monthly bills are likely to increase.
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“This proportion of borrowers directly impacted by a rate rise will be smaller than in the past, in part because the vast majority of new mortgages in recent years were extended on fixed interest rates” explains Robert Gardner, chief economist at the Nationwide.
He says the share of outstanding mortgages on variable rates - and which are therefore likely to see an increase in payments if the base rate is increased - has fallen to a record low of about 40 per cent, well down from a peak of about 70 per cent in 2001.
“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” he adds.
Source - Estategencytoday
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