Bank of England Base Rate Increase

03/02/2022 - another day, and another reminder of the soaring costs of living, this time in the form of the Bank of England increasing the base rate to 0.5%, only a short period after the previous increase in December 2021. Policy makers are taking measure in order to try and curb inflation across the wider economy, but what impacts does this have in particular on the housing sector, and the millions of us with mortgages. Here we take a deeper look.

What impact will this have on you?

Straight to the point everyone wants answers to, what impact does this have on YOU.
Well, if like the majority of us you are locked into a fixed rate, you can rest assured that for the time being, this increase will have little/no impact on you in the here and now. As you’re fixed, your interest rate is locked in place, and therefore this increase will have no impact on you for the time-being. When you come to remortgage however, this is when you’ll see the impact of these rate rises. Already within an hour of the base rate increasing, we are seeing lender emails notifying us of increases to their mortgage products, reflecting the increase in the base rate.

Currently on a tracker rate/your current lenders SVR?

Sadly if you fall into this category, you’ll be affected by this rate rise almost instantly. If you have a tracker mortgage, which many do, it’s worth speaking to a mortgage broker instantly to find you a suitable alternative moving forwards, and securing yourself the best mortgage deal to protect you against any further predicted rate rises. Right now, your interest rate has just gone up 0.25% and there’s nothing you can do about it.

Example:
£200,000 mortgage over 25 yrs tracking base rate at 1.5%
December ‘21 = 1.6% and payments of £809.30
Morning of 03/02/22 = 1.75% and payments of £823.58
1pm of 03/02/22 = 2% and payments of £847.71
Monthly increase of £38.41 or £460.92 over the course of the next 12 month, in the space of 2 months.

What will this mean for the housing market?

At this moment in time, it’s hard to tell and we certainly couldn’t predict this - if we could, we’d tell you. However, an increase in rates could potentially spook potential buyers, or could see monthly payments now fall outside of peoples budgets, forcing many to put plans of buying on hold.

Could this see house prices fall?

Who knows, there’s such strong demand and little supply, that this increase could see house viewings fall from 20 viewings per property to 10, but even 10 people viewing a property could still potentially lead to a bidding war, and therefore the market could remain strong. After all, what we’re hearing from our clients recently is that the quality of stock coming onto the market is quite average a lot of the time, so anything nice is still drawing in the crowds.

Likewise, with rates set to increase further as 2022 goes on, many could see their hand forced into looking to move now before rates rise further and it becomes too late. A movement like this would only add even further demand to the property markets, and could see house prices increase further, or certainly remain as they are.

Conclusion? - tread carefully, do your research and make a calculated decision. As no one knows how markets will react, all we can suggest is keep reading latest news regarding any developments. When Covid hit, it was thought house prices would fall as people weren’t looking to move/feared going to see properties/sell theirs due to the risks it potentially posed, yet in reality the opposite happened. Yes, this was stimulated by lowest ever interest rates and Stamp Duty Relief, but no one was prepared for what followed (houses being sold way above asking on a frequent basis).

Are there more rate rises coming?

Again, we can’t go on record as saying yes or no, but what we can say is the policy makers at the Bank of England who set the base rate have suggested this is inevitable. Speaking in November, the Monetary Policy Committee (MPC) stated the “market-implied path” for the bank rate would see it rise to around 1 per cent by the end of 2022, based on the projected rise of asset and energy prices. It did go on to say this may be an overestimate, but one thing is for sure… if you are:

• On your existing lenders variable rate (SVR)

• Currently on a ‘tracker’ rate which follows the BoE base rate

• Or your current fixed rate deal ends within the next 6 months

  CALL US NOW.

A bold statement and a very direct call to action for you to do something, but seriously, if you fall into any of the categories above, you really should speak to a mortgage advisor and find the best mortgage rates for you, before it’s even later down the line, and rates have potentially increased further.

Remember, our remortgage service is free for standard remortgages/those looking to raise funds do buy another property/for home improvements.

Providing mortgage advice across the UK, our North East mortgage brokers are here to support you. Whether you are moving home, looking for a first time buyer mortgage, looking to remortgage your home, or looking at what buy to let mortgage rates are available to you, we can support any need.

Call today on 0330 100 1231 to speak with one of our expert advisers and start your mortgage journey, hassle free and stress free.

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