On November 3rd, the Bank of England has raised interest rates by 0.75 percentage points to 3%, the largest rise in the cost of borrowing since 1989. PHPD collects reactions and comment from the housing industry. This post may be updated as the story develops.
Jatin Ondhia, CEO, Shojin said:
“There’s no longer any great shock in the Bank of England’s course of action, but we must prepare for the after-effects. Most obviously, while the signs suggested that the property market was already feeling the effects of rising interest rates, this latest, more significant jump, will certainly have an impact.
“As the cost of borrowing climbs sharply, people’s chances of getting onto or moving up the property ladder will diminish, while traditional property investments, like buy-to-lets, will likely become less attractive. We could see people pursue alternate forms of real estate investment, including fractional investment into developments.
“I would expect investors to consider the assets and markets they are backing right now, with diversification a logical route for many during times of high inflation and rising interest rates. Alternative investments could become more popular, with investors potentially seeking to balance higher-risk options that could better keep pace with inflation at the same time as still gravitating towards safe haven assets.”
Hinesh Chawda, MD of boutique property developer Life Less Ordinary, said:
“The Bank of England’s decision to make the largest rise to the base rate in 30 years will undoubtedly add to the continued pressure on housing affordability. Purchasing a new home, especially for first time buyers, will be increasingly difficult and this will negatively impact what is already a fragile market.”
Forbes Advisor’s UK Editor and financial expert, Kevin Pratt, said:
“Today we’ve seen another chunky rise in the Bank rate, and that can only mean bad news for mortgage holders. Lenders are likely to pass on the hike, and those on variable rate and tracker deals will probably see an increase in their repayments immediately, while those on fixed rate plans will likely be faced with more expensive loans when their term comes to an end and they need to find another deal.
“If you have £200,000 mortgage and are paying 5.5% at the moment, that equates to around £1,230 a month. But if your interest rate were to rise to 6%, your monthly bill would be £60 higher – that’s around £720 a year extra to find.
“If you had a £300,000 mortgage and saw your interest rate jump from 5.5% to 6.5%, your monthly bill would shoot up from around £1,840 to closer to £2,025 – that’s not far short of £200 a month more, or well over £2,000 a year.
“There is a crumb of comfort in today’s announcement. Anyone with an interest-bearing savings account should see an uptick in their income if their bank or building society passes on some or all of the increase. If it doesn’t, then it’s high time to think about moving to a more rewarding account.”
