The recent unexpected interest rate cut by the Bank of England has sent ripples through the financial world, and the UK property market is no exception. Here at KhanMather, we understand that these changes can be confusing, so we’re here to break down what this cut means for homeowners, buyers, and investors.
What Happened?
The Bank of England’s Monetary Policy Committee (MPC) has lowered the base interest rate. This decision is primarily aimed at stimulating economic growth but how does this seemingly macro-economic move affect the bricks and mortar of our homes and investments?
Impact on Mortgages:
• Existing Mortgages: For those on variable rate mortgages, this cut is likely good news. You should see a reduction in your monthly payments, although the exact amount will depend on the terms of your individual mortgage agreement. Contact your lender to understand how the rate cut will affect your specific payments. Fixed-rate mortgage holders won’t see an immediate change, as their rates are locked in for the fixed term. However, when it comes time to remortgage, they may find more competitive rates available.
• New Mortgages: Lower base rates typically translate to lower interest rates offered on new mortgages. This could make borrowing more affordable, potentially increasing demand in the property market. For first-time buyers, this could be a welcome opportunity to get onto the property ladder. However, it’s crucial to remember that affordability assessments still apply, and lenders will carefully scrutinise applications.
Impact on the Housing Market:
• Increased Demand: Lower borrowing costs could stimulate demand for property, potentially leading to increased competition and upward pressure on house prices. This could be particularly noticeable in certain areas where demand already outstrips supply.
• Market Confidence: A rate cut can sometimes signal a lack of confidence in the economy, which could have a dampening effect on market sentiment. However, the primary motivation for this cut suggests that the Bank is acting proactively to support growth, which could ultimately bolster confidence.
• Investment Properties: Lower interest rates can make buy-to-let investments more attractive, as the cost of borrowing is reduced. This could lead to increased activity in the rental market.
What Should You Do?
• Review Your Mortgage: If you’re on a variable rate mortgage, contact your lender to understand how the rate cut will affect your monthly payments. If you’re nearing the end of a fixed-rate term, start researching the best remortgage deals available.
• Consider Your Options: If you’re thinking of buying a property, now might be a good time to explore your mortgage options and get pre-approved. However, don’t rush into any decisions. Carefully assess your financial situation and ensure you can comfortably afford the repayments.
• Seek Professional Advice: Navigating the property market can be complex, especially with changing interest rates. At KhanMather, our team of experienced property law specialists can provide you with expert guidance and support throughout the process. Contact us today for a consultation.
If you wish to discuss the above or require additional information, please contact Hannah on 0161 850 9911.