Reactions to Bank of England Interest Rate Increase

This week we have seen the first interest rise from the Bank of England in a decade but, of course, this came as no surprise and takes us back to where we were 18 months ago. Consequently, the 0.25% increase was greeted calmly by the markets but this is will be the start of an upward trend that Savills predict will mean incremental rises of up to 2.5% over the next five years. However, such increases need not be a cause for panic as even these higher rates are low by historical standards (I still remember buying my first whom when I thought rates were at a cheap rate of 9%) the wide uptake of fixed mortgage deals will limit the impact on household incomes. Projections for house price rises remain positive with Savills predicting growth of 14% from 2018 to 2022 on the assumption of rates having risen to 2.25%.

Commenting on the current market trends, Russell Galley, Managing Director, Halifax Community Bank, said:
“The annual rate of growth has continued to rise for the third month in succession, rising from 4.0% in September to 4.5% in October. The average house price is now £225,826 – exceeding last month’s previous high. House prices in the three months to October were 2.3% higher than in the previous quarter, the fastest quarterly increase since January.

“The fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, continues to support house prices and is likely to do so over the coming months. Increasing pressure on household finances and continuing affordability concerns are some of the factors likely to dampen buyer demand. That said we do not anticipate the Base Rate rise will be a barrier to buying a house.”

In the meantime, we are continuing to see the demand for new homes is generally strong with the Help to Buy scheme adding a good incentive. CALMEZ offers developer loans and developer funding in the form of mezzanine and stretch funding to property developers and builders with proven track records and whom meet our lending requirements. For more information then please contact us here or by calling 0207 096 1900.

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