Bank rate rises to 0.5% - but don’t panic
Last week, the Bank of England raised interest rates from 0.25% to 0.5%, for the first time in a decade – a move that most of the property industry have been expecting for some time now.
However, this small rise shouldn’t have much of an impact on Bath’s property market. There will of course be a change for some new and existing homeowners, but there are a number of factors which should limit the impact for everyone…
Firstly, most households are on fixed rate mortgages. Therefore anybody on one won’t see a change in their monthly payments. However, do your research when you come to the end of it. You may be able to find new deals which offer lower payments than moving onto your current lender’s standard variable rate. Mortgage rates shouldn’t soar up – they’re already at a historic low – but if you fail to remortgage, you may get a ‘payment shock.’
For those on variable rate mortgages, the degree of impact will obviously depend on the size of the mortgage. However, although inconvenient, the increase should be manageable. For example, if you are the average homebuyer with the typical mortgage in Britain of £175,000, expect an additional £22 a month, approximately. A first-time-buyer taking out a £100,000 tracker mortgage would pay an extra £12 per month.
This is not the start of a consistent and frequent increase in rates. The BoE has reiterated that interest rates will remain very low for the foreseeable future, rising slowly towards a ‘new normal.’ This will still be far below where interest rates used to be.
We’ve enjoyed ten years of great mortgage deals, but the majority of people understand that good things can’t last forever. Small price rises are normal across a variety of sectors.
The housing market has already demonstrated resilience to a general election and Brexit, so a small rate rise is unlikely to have any significant effect.
Demand for good quality homes in Bath, remains strong.
Furthermore, as new borrowers have to show mortgage lenders they can tolerate a rate rise much higher than +0.25%, impact on affordability should be limited.