Bank of England’s Decision to Hold Interest Rates at 0.5%

Property Master’s, Angus Stewart, and Trussle’s Ishaan Malhi, comment on the Bank of England’s decision to hold interest rates at 0.5%.

In November 2017, the Bank of England raised interest rates by 0.25%, for the first time in a decade. As of now, it seems the bank is set to hold this rate constant at 0.5%. This means different things for landlords and tenants, as well as first-time buyers and larger scale property investors.

Angus Stewart, Chief Executive of Property Master, says:

“Today’s decision by the Bank of England to hold interest rates at the current level of 0.5% is not unexpected but we have to ask for how much longer this situation will continue.

“The Bank has been dropping very heavy hints for quite some time that there needs to be a move towards getting rates back to some kind of more normal level following the 2007/2008 financial crash. I would expect rates to move upwards at least once this year and many commentators have settled on May as being the most likely month for this to occur.

“At the moment we are seeing rates for buy-to-let mortgages hold or even in some cases move slightly downward. This is very good news for landlords, but we would not expect this to continue across the board for much longer, especially as the pressure on the Bank of England to increase rates builds. Also, the withdrawal of cheap Bank of England funding such as the Term Funding Scheme must feed through the lenders at some point. Landlords wanting to take advantage of these attractive rates need to move fast.”

Bank of England in London, UK

Ishaan Malhi, CEO of online mortgage broker Trussle, comments:

“The Bank of England may have opted to sit tight today, but it’s likely that they’ll lift rates in the next couple of months. This would impact all consumers, but particularly home owners who’ll see mortgage rates rise to their highest level in a decade.

“In fact, we’ve already seen many lenders increase their rates in recent months in anticipation of a rate rise. But borrowers are starting to react too. According to recent figures, the number of people remortgaging in January hit a nine-year high.

“However, today’s focus on interest rates really only highlights half the story when it comes to mortgages. As lenders change the rates of their deals, many will change the attached fees and incentives too. It’s important to take the total true cost into account, since a higher-rate deal can actually be cheaper overall than a low-rate deal.

“For example, choosing the lowest rate mortgage deal with one of the Big Six lenders would actually cost the average homeowner £400 more than if they were to choose the lender’s lowest true cost deal. Comparing deals this way isn’t as straightforward as it should be, so it’s worth seeking advice from a broker to make sure you’re making the right choice.”

Check out how landlords are coping with rising interest rates, as well as how the changes might effect tenants and younger people.