As interest rates rise for the first time in a decade, we examine what this could mean for mortgage holders, property investors, and the property industry as a whole.
The Bank of England’s committee voted 7-2 in favour of the rise in interest rates which is the first increase since 2007. The last time interest rates were raised in the UK, it was Sir Mervyn King who was head of the Bank of England, not Mark Carney, and Gordon Brown had only recently taken over as Prime Minister from Tony Blair. The base rate of interest was previously set to 0.25% in an attempt to keep inflation at 2% and unemployment low. In order to achieve these aims in the long term, the Bank of England has decided to raise the base rate of interest to 0.5% citing the rising rate of employment and the current rate of inflation.
There are a number of effects which a rise in interest rates can have on the property market, not least for investors and those on mortgages. Mark Carney, the head of the Bank of England has stated that due to 60% of people being on fixed rate mortgages, most UK households will not have an issue with meeting their mortgage repayments. The returns which are offered by property mean that this rise in interest rates will likely not be a major factor for most investors when analysing a new purchase.
Our Managing Director here at Robert Irving Burns, Antony Antoniou made the following statement: “Inflation and low unemployment figures provided the case for increasing the base rate which has largely been priced into the markets for a while. Commercial Real Estate still provides very positive returns against cash and the increase which was widely anticipated is unlikely to dampen investor demand.”
Having been in business for over 50 years, Robert Irving Burns has seen many changes within the property industry and has consistently shown themselves willing to change and adapt with the times and these changes to interest rates are no different. Our years of experience is of vital assistance in helping our clients understand any changes or fluctuations within the market and helping them find the best property for their needs.
To find out more about what our team of property experts here at Robert Irving Burns can do for you, please do not hesitate to contact us with any property related enquiry you may have or visit us in our Margaret Street offices and we will do our best to assist you.