Bank of England Interest Rate Announcement Comment

Today’s interest rate rise of 0.25% was lower than some expected but for Britain’s homeowners, and the housing market as a whole, the worst may yet be to come.

It might be hard to believe but only 17 short months ago the rate was 0.25% so todays new rate of 5.25% represents a steeper and quicker rise that only the most pessimistic commentators would have predicted. Given the various economic and global challenges it has been needed to combat spiralling inflation but the true cost is yet to be felt with many people coming off attractive 2 and 5 year fixed rates in the coming months. Those with tracker mortgages are already feeling that pain acutely with some having seen a £200k interest only mortgage rise from £91 per month in December 2021 to an eye watering £950 from next month.

Clearly this sort of impact on disposable income is going to have a massive effect. On a good day the housing market is never far from being a topic in work places and dinner parties but right now it is hot news as we all come to terms with going back to “normal” levels of borrowing costs.

However, the problem this creates for the housing market is huge. Whilst confidence is the oxygen for a healthy market, uncertainty or fear is the exact opposite as those who would like to move but don’t have to batten down the hatches and sit tight until they’re sure that things have stabilised.

For many the key question is “when will things stabilise?” The answer to that is far from straightforward but a best guess is that any reduction in rates is going to be much slower and more cautious than the rapid increases have been.

From our point of view we have certainly seen that there has not been the expected upturn in new instructions. With live searches currently being undertaken in various locations across the country lack of stock continues to be the message. Whilst competition is less fierce than it was we are still having to think outside the box on a daily basis to secure properties for our clients.

What is certain is that the days of ultra low interest rates are now going to be consigned to history and we are all going to have to get used to paying more for our borrowing.

PLG Consultants

3rd August 2023

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