The Bank of England has raised its Base Rate for the first time in three years, from its historic low of 0.1% to 0.25%.
Cue some predictably alarmist posts by estate agents up and down the land trumpeting the news... but, what does it mean and why has it happened? You'd be forgiven for wondering, as I'm not sure I have yet seen much that offers anything in the way of informed opinion, insight or explanation.
So, we'll try and offer some perspective here.
The first thing to note is that we have been expecting this rise (and for our part, have been telling you it's coming). We were fairly surprised not to see them raise the base rate when they convened in November. And frankly, we expect it to be raised at least another quarter of a percent in the near future - perhaps as soon as the next meeting in just a few weeks' time. Actually, my own view is that they will raise it at least once more after that in the relative near term - probably before the end of the Spring in my view, but I would certainly be surprised if it didn't happen again within the year.
The reason for raising it is to mitigate the effect of rising prices. BUT, let me elaborate a little more on this point, as if you only read estate agent posts you will certainly be forgiven for thinking it is all about rising property prices.
It is to do with inflation, which has hit 5% and which is predicted to hit 6% by springtime. Don't get me wrong; house prices have been rising too, and fast (although did anyone let you know that they actually dropped in October and November? No, thought not...). Nevertheless the factors that are really driving inflation are global ones - the value of stocks and bonds and the price and availability of energy, in particular.
The Omicron wave that is breaking over us now is likely to bring some negativity to trading market places generally. However, even the prophets of doom out there tend to agree that whilst the peak is going to be a steep one, it will be relatively quickly reached compared to previous waves, and will drop quickly on the other side once reached - to the extent that actually I believe we will be unlikely to see any significant impact on property prices or buyer demand in the new year. We have more to worry about from snow than we do from Covid, when it comes to property.
But what about my mortgage, I hear you ask? Well - most people in this country have fixed rate mortgages; and I mean, 74% of mortgagees, in fact (mortgagees being about 33% of adults in the UK), and those have been fixed on historically low rates. So, the majority of people therefore will feel no immediate difference to their monthly mortgage payments, but that isn't to say that they shouldn't consider their current deal, look at when it is going to come to an end and think about whether it is worth looking at fixing a new rate now - even if it means a penalty in the short term to break the current deal.
Mortgagees on Standard Variable Rate mortgages or Tracker mortgages will see an increase. But look; this particular rise has amounted to 0.15%, and that equates on average to an extra £15.45 per month for people with Tracker mortgages, and less than £10 extra per month for those on Standard Variable Rate mortgages. Of course, these do obviously go up again if there is to be the following quarter percent rise that I have mentioned we think will come soon enough, and then yet again if there is to be the third rise that I personally do suggest will come not ridiculously far down the line afterwards. But even still, we're talking about a base rate of up to 0.75% at that point - and still therefore historically low - and mortgage payments increasing by tens of pounds per month, not hundreds of pounds. A pain, I admit, but not something that will break most mortgaged households or precipitate any kind of crash.
I'm not saying not to worry about your mortgage payments, by the way, I really am not. I am saying that we should keep things in perspective; there is probably more to worry about in terms of energy prices and food prices than there is for mortgage payments, over the next six months at least and more likely over the next twenty-four.
If you would like to discuss your mortgage options and get a real sense of the mortgage landscape, then I urge you to speak to a qualified advisor. We can certainly put you in touch with a number of advisors who can offer free advice.
And if you have been thinking of moving and have suddenly worried that the whole thing has just become unaffordable, then I hope this article has helped to settle some of those nerves. If you wanted to discuss any of this further, then you only have to give me a call; 07982 632733.
It really isn't Armageddon folks.
The news is out today that the proposed tenancy fees ban is going to be delayed until at least the Spring of 2019, with some in the industry suggesting that this marks the beginning of the end of the ‘mad notion’ of banning tenancy fees. Already today, some fellow agents have been asking us if we regret our decision to not charge tenants fees.
The answer is: no, of course we don’t. This news was hardly surprising for anyone who reads the industry press further than the headline, and our decision about whether we charge tenants fees or not wasn't a question of economics, it was a question of ethics.
So just to be clear: We – Do – Not – Agree – With – Charging – Tenants – Fees… Yes, we know we could make more money by charging extra fees to tenants... we just don't want to! It is in our ethos as a firm.
The Chancellor, in his Autumn Fudge-It, has decreed that, with immediate effect, first time buyers will pay no stamp duty on properties up to £300,000. So, good news you lucky things... you can now afford that one bedroom flat in Oxford that you have always dreamed of. Right?
OK, I admit to being a little facetious here. My comment above isn't to disparage anybody's one bedroom flat, nor anybody's aspirations to own one. It is intended to give us pause for thought, to help us see past the headline, to try to bring us back down to Earth and remind us that we are still in this incredible situation where, across so much of Oxford, a £300,000 budget barely gets us onto the ladder. Who cares about the saved stamp duty, really? Stamp Duty can be a problem, no doubt; but it is still a drop compared to the deposits that our young people need to save in order to go for that first mortgage. I care more about how first time buyers can afford to save those deposits, especially when it's nigh on impossible to rent even a single room in the city for much less than £500 a month - add on everything else that life costs, how can anyone afford to save anything? Not everyone is lucky enough to have parents willing or, ultimately, able to lend a helping hand to contribute towards (or even 100% fund) their deposit, and that is creating an increasingly uneven playing field, and an unfair market place.
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