I hope you are well and preparing yourselves for the heatwave (???!)
So what does happen to house prices in our region?
·
There is a long standing relationship between house prices and interest
rates, with changes in base rates acting either as a stimulus or used to calm
the market. Interest rates dropped below 5%, in 2001, fuelling house price
growth. In 2008, once rates dropped below 4% it halted the price falls
triggered by the GFC.
·
The Bank of England’s decision to cut interest rates by 0.25 points will
support the housing market through a challenging period. However, while mortgage
costs will be kept low, we do not expect it to trigger additional price growth
this time.
·
c80% of loans taken out in Q2 2016 are on fixed rates, as are around
half of all outstanding mortgages, meaning that savings will not be passed on
to many. For those who do benefit, the savings will largely be minimal. A
homeowner with a £150,000 tracker mortgage at 2% over base will save just £19
per month. Those on interest only mortgages will see slightly larger savings of
£32 per month.
Those who have not fixed their mortgage rates
now have a terrific opportunity to look for new finance to lock-in the historic
low, which could be a relatively short-lived position, given the forecasts that
inflation looks set to breach the Bank’s target of 2% over the coming 12 months
and may create some pressure for the Monetary Policy Committee to lift rates at
the earliest opportunity.
Enjoy your Thursday
Best regards
No comments:
Post a Comment