Base Rate Rises Reaction

Press Releases

The Bank of England’s Monetary Policy Committee today voted by 9 to 0 in favour of a 0.25% base rate rise, increasing the base rate to 0.75%.

Andrew Turner, chief executive at specialist buy to let broker Commercial Trust Limited, commented:

“Today’s news will not have come as a shock to many, as the Bank of England has hinted at the likelihood of an increase for several months.

“Whilst many buy to let landlords might have felt the need to adjust their investment strategy, following the previous base rate rise in November 2017, lenders have, on the whole, maintained historically low interest rates for buy to let mortgage products.

“Landlords should remember that there are a record number of buy to let products in what remains a fiercely competitive lender market – and perhaps this somewhat tempers the impact of a base rate increase on product rates.

“Landlords on some tracker and standard variable rate buy to let mortgages, are likely to see an immediate impact on their repayments, with increases to the monthly amount. If this is the case, call our advisors to see if we can help you.

“Today’s announcement suggested that further rates rises might be in the pipeline, but they would be at a gradual pace and limited extent.

“If these were to manifest, the combined impact of two or three rates rises could start to see buy to let product rates increase noticeably. However, there are other factors that might determine product rates and we don’t have any certainty of future increases, or when they might occur.

“With this in mind – not to mention the continued uncertainty of Brexit discussions, now might be the perfect time for landlords to re-evaluate their buy to let portfolios.

“Remortgaging to a lower, fixed rate, might be possible, but this will not necessarily suit everyone’s circumstances. This is where a specialist buy to let broker, working with a wide network of lenders, can add value to an important investor decision.”

“Despite historically low interest rates for almost a decade, home ownership is increasingly out of reach for low and middle income earners due to the widening gulf in the ratio between average incomes and house prices.  

 Today’s uptick in interest rates will increase the cost of variable and tracker mortgages for millions and hence further enhance the attraction of renting, specifically the ever increasing number of communities that are professionally run and institutionally owned.”

Jonathon Ivory

Managing Director, Atlas Residential

Paresh Raja, CEO of bridging lender Market Financial Solutionsreacting to the news stated.

“Since interest rates first rose from the record low 0.25% to 0.5% in November last year, there have been strong predictions that a further rate increase would follow in the months soon after. However, rising inflation coupled with stagnant economic growth in Q1 2018 put such a move on hold. Now, following the steady growth of the UK economy over the summer months, the Bank of England has today taken the bold step to increase the base rate of interest to 0.75% – the highest it has been in nearly a decade.

“The impact this will have on UK consumers will vary. Those with savings accounts will enjoy a marginal increase in returns. However, for those homeowners paying off variable or tracker mortgages, they will now be faced with an increase in their monthly payments, which could place considerable strain on households. What’s more, this rate rise will mean that banks will be more cautious when it comes to approving mortgage applications. The stringent lending measures that have been imposed since the onset of the financial crisis a decade ago have made it tough for people to access finance from high street lenders, and this latest rise could make it more difficult for people to successfully acquire a mortgage from a bank due to the increase in monthly payments they will now face.”

With Market Financial Solutions now over 11 years old, Paresh has become a prominent commentator on issues within the finance, property and investment sectors – he is regularly featured in the national and trade press, so I hope this quote is of use to you. Please do let me know if you wish to run with the comment as part of anything you’re working on, or if you require anything from Paresh more catered to a specific topic or angle.

Nick Marr, Co-founder of rental marketplace, comments on the impact of the interest rates rise for tenants and landlords:

“We were all expecting the announcement of the interest rates rise today, but that won’t make it any easier for mortgage holders and landlords to deal with. Landlords have already been put under immense pressure by a raft of new legislation and changes to the Private Rental Sector over the past couple of years. Many landlords are already feeling the strain on their finances from the Section 24 tax changes and increased Stamp Duty on second home purchases – plus there is the highly likely possibility of an increase in letting agency fees once the Tenant Fees Ban kicks in. Adding to all these existing pressures with a further 0.25% interest rate rise could make it even harder for Buy To Let landlords to maintain their bottom line.”

“Our research from April this year showed that almost 1 in 3 landlords were planning to raise rents in the next 12 months to help cover the increased costs of running their rental business. With the added possibility of mortgage lenders upping their rates – this proportion of landlords could increase even further.”

“Unfortunately, this could mean that tenants end up taking on the cost of the rates rise, as Buy To Let landlords, in many cases, price their rental properties according to their mortgage repayments.”

“Renters are largely unaware of how interest rate rises and tax changes can have a knock-on effect to the amount they pay for their housing. While the supply and demand rules of the market should minimise the potential for any extortionate rent increases, I believe we will see many landlords raising rents by 2-4% in the next 12 months.”

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