The UK's base rate is unchanged at 0.5 percent
There was good news for borrowers today as the Bank of England’s Monetary Policy Committee decides not to raise the base rate.
It said that the weak economic growth at the beginning of the year as well as the weather may be to thank for the decision, which was 7-2 amongst the nine voting members, saying more substantial evidence of economic activity was needed before any future increase.
Chris Charlton, head of residential sales at Savills Nottingham, welcomed the news: “The Bank of England base rate remaining at 0.5% comes as welcome news which we anticipate will continue to underpin improvements in the market. However, the concerns expressed by the Bank of England that the economy will remain stagnant unless the rate rises may impact later in the year unless we return to stronger growth across all sectors.”
However, group commercial director and group head of mortgage services at SDL Group, Rob Clifford, says we shouldn't be too worried about a rise should it come: “The millions of consumers on variable rate mortgages, I’m sure, will be breathing a sigh of relief – but I think it’s worth remembering that a modest rise in rates would not have had as much of an impact as some would have you believe. "Compared to a typical base rate of around five percent until just 10 years ago, the rise of 0.25 per cent, that had been expected until the last few weeks, would still have kept rates close to record low levels.”
Rob Clifford, commercial director at SDL Group
“Many savvy consumers have been preparing for a rise for months in any event. The latest data from UK Finance shows an 11.3 percent increase in remortgages year-on-year, suggesting that consumers were, very sensibly, looking to bag themselves a fixed deal while fixed rate deals remained so appealling.”
“And even for those on a variable rate, the impact could be less painful than many consumers might expect.”
"Nationwide says that a 0.25 percent rise in rates would equate to an increase of just £25 per month, £300 per year, on a £200,000 variable rate mortgage.”
"As unwelcome as it would naturally be, a modest rate rise would have very limited impact on affordability for most."
Rob added:“Regardless, with no rate rise today, I think we’ll see remortgages continue at around their current transaction levels, as consumers continue to prepare for the inevitable to happen.
"Steady rate rises could also apply some gentle downward pressure to house prices, reducing the affordability gap and leading to more house purchase business over time.”
“I don’t think the property industry should be fearful of BoE rate movements.”
"In fact, I can even see an argument that, by keeping inflation in check and assuming wage inflation outstrips it, a modest rise could free up some net income to help consumers to save for a deposit.
"As raising funds for a deposit is still the most significant barrier to home ownership, the optimist in me says that, in the long term, modest rate increases can have a positive impact on the market.”