Mark Carney was appointed Governor of the Bank of England in 2013 – when bank base rate stood at 0.5%.
So today’s 0.25% rise has been a long time in the making – especially given Mr Carney’s much derided ‘forward guidance’ strategy and many false pointers to interest rate rises in the past.
Not for nothing has the ‘unreliable boyfriend’ tag stuck to Mr Carney like glue.
Even today’s rise has been slow to materialise. While some had expected a rise in May, some first quarter weak economic data – now much revised and upgraded – and the ‘Beast from the East’ – caused the Bank of England to hold interest rates. However, in June it became clear that the majority were likely to vote to raise interest rates in August. Interest rates have been at a record low since 2016, only increasing by 0.25% in November of last year since the 2007 crash.
Rate increases usually happen in a period of economic growth when the Bank is trying to control the pace of inflation, to try and ensure it remains at around 2%. With inflation currently at 2.4% and record levels of employment, the Bank of England will most likely have made its decision based on these factors.
So what does it mean for the housing market? Well perversely, it is probably good news. The rate rise has been largely factored into mortgage rates and all the major lenders have targets to reach for 2018 in a fiercely competitive market. Mortgage deals for home-movers are likely to remain very attractive and such a small rise does virtually nothing to dent affordability.
The housing market hates uncertainty more than anything else. So with the rise now out of the way, and the path to any future rate changes likely to be slow and gradual, we expect to see a healthy local market this Autumn.
If you have a mortgage on your current home, what does it mean for you?
If you’re on a tracker mortgage, then the quarter point increase will be passed on in full, most likely at the beginning of September.
A homeowner with a £200,000 repayment mortgage tracking at 1.5% above the Base Rate will see their monthly payments go up by around £25 a month.
If you’re currently on your lender’s standard variable rate, it is up to your lender to decide how much, if any, of the base rate increase they will pass on. Some lenders will raise rates by the full quarter percent or possibly more, whilst others may choose to make smaller increases, or not to increase their variable rate at all.
Remember that if you are currently on your lender’s SVR, there are usually much better deals available, even if your lender decides not to raise rates. Take a look at our best buys to see if you can find a better mortgage.
If you’re on a fixed rate mortgage deal, you won’t see any change in your monthly payments. However, even though there won’t be any immediate effect, it’s important to remember that rates could be higher when your current deal finishes, so you need to be prepared to shop around when you come to re-mortgage.
If you would like up-to-date mortgage advice, a completely FREE no obligation property valuation or just a chat about the market please give us a call on 01243 861344. Our friendly local experts will always be happy to help.