The Bank of England announced a new reduction in its base rate, bringing it down from 5% to 4.75%.
The Bank of England (BoE) base rate is the interest rate at which the BoE lends money to commercial banks. It is the single most important interest rate in the UK and it directly influences the cost of mortgages for property investors. Understanding the base rate is essential for UK property investors to make informed decisions about buying, selling, or renting property.
The Bank meets every six weeks to decide what should happen to interest rates. With the aim of keeping inflation to its target, and keeping the wider economy healthy. It was announced in October that inflation had fallen to 1.7%, which is below the 2% target the government sets for the Bank.
The reduction aims to stimulate UK economic growth and maintain levels of employment whilst balancing the risk of inflation increasing above the BoE’s target of 2%. For property investors, this could present a potential opportunity within the UK market.
It was widely expected that the Bank’s monetary policy committee would cut the rate – the second decrease this year.
However, it is still uncertain whether the anticipated additional rate cut in December will now happen.
What’s happened to mortgage rates recently?
We’ve seen mixed behaviour from lenders in recent weeks, with some increasing their mortgage rates, and some decreasing. This is largely because we’ve seen quite a bit of movement in swap rates – the underlying costs of mortgages to lenders – which has meant some have needed to reprice their products to bring themselves back in line with the rest of the mortgage market.
What does the Base Rate reduction mean for my current mortgage?
Changes to the Bank’s Base Rate can impact how much interest you’ll pay on loans, including mortgages. If you’re on a fixed-rate deal, your monthly payments won’t change until the end of your deal. And if you’re on a tracker mortgage, or a variable rate mortgage that follows Base Rate changes, this month’s Base Rate reduction will mean your monthly payments will take on this drop.
What Trump could mean for the UK Property market.
Donald Trump’s election as US President may provide some opportunities for prime UK residential markets, Knight Frank suggests.
Tom Bill, head of UK residential research for Knight Frank, highlighted that in addition to having a high deficit, Trump said he wants a weaker dollar to make the US more competitive. He stated “that would mean the window of opportunity for overseas buyers in the UK looking to take advantage of how weak Sterling has been since the Brexit referendum of 2016 may start closing and plans may accelerate.
Beyond that, a number of Democrats and high-profile individuals may decide to move to London and live under a government more aligned with their political views. After all, the party raised more than a billion dollars during the election campaign, which was three times higher than the Republicans. Tensions in the Middle East may also heighten following Trump’s victory, which means a number of buyers from the gulf may start looking more closely at London.”