The Bank of England’s Monetary Policy Committee (MPC) has today voted unanimously to keep its base rate at the current level of 0.5%.
Today’s announcement is good news for buy to let landlords, especially those on tracker rate products, as historically base rate increases have preceded hikes in mortgage interest rates.
Commenting on the news, Andrew Turner, chief executive at Commercial Trust Limited said:
“This is positive news for landlords. There has been much speculation that the Bank of England MPC will increase rates during 2018, due to the growth of inflation and the threat of an overheating economy. Indeed, the Bank of England has hinted this will be the case over the coming years.
“This is the second consecutive meeting to maintain the current rate, after the MPC increased it by 0.25% in November 2017.
“That decision resulted in some buy to let mortgage lenders increasing their mortgage interest rates, adding costs to monthly repayments for landlords on tracker and variable rate mortgages.
“For many landlords, this was the first mortgage rate rise they had experienced, as the base rate had not increased in a decade.
“But, it should be remembered that current mortgage interest rates remain at historically low levels.
“Today’s announcement gives landlords more time to assess their property investments and to evaluate whether or not to take advantage of these low rates by remortgaging, in anticipation of any future rates changes.
“The next two MPC meetings are scheduled for March 22nd and May 10th.
“I welcome any landlord who has not recently reviewed their mortgage position to get in touch with Commercial Trust. There have been many changes in the industry that have added an additional layer of complexity to sourcing a suitable mortgage. This makes getting a correct picture of the options ever more essential.”
Commenting on today’s announcement, the Bank of England indicated the likelihood of further base rate increases at a gradual pace, with efforts to reduce inflation from the present 3% to 2%, continuing to be an important factor in future decisions:
“Over the past year, a steady absorption of slack has reduced the degree to which it was appropriate for the MPC to accommodate an extended period of inflation above the target. Consequently, at its November 2017 meeting, the Committee tightened modestly the stance of monetary policy in order to return inflation sustainably to the target.
“Since November, the prospect of a greater degree of excess demand over the forecast period and the expectation that inflation would remain above the target have further diminished the trade-off that the MPC is required to balance. It is therefore appropriate to set monetary policy so that inflation returns sustainably to its target at a more conventional horizon. The Committee judges that, were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report, in order to return inflation sustainably to the target.
“In light of these considerations, all members thought that the current policy stance remained appropriate to balance the demands of the MPC’s remit. Any future increases in Bank Rate are expected to be at a gradual pace and to a limited extent. The Committee will monitor closely the incoming evidence on the evolving economic outlook, and stands ready to respond to developments as they unfold to ensure a sustainable return of inflation to the 2% target.”