Today, the Bank of England announced that they will leave interest rates frozen at 0.5% after speculation that we could see an increase of 0.25%.
This will be welcome news for thousands of UK homeowners who could have seen the cost of their monthly mortgage payments increase as a result, or upon renewing their terms if they were currently locked into a fixed rate deal.
While 0.25% may not seem like much, for those renewing their mortgage terms or for first-time buyers getting on the ladder, the average cost of borrowing would have seen an increase of over £1,000 during the 24-month term – further fuelling the unaffordability of
homeownership in the UK.
Although this would have been manageable for most, it highlights the danger of homebuyers borrowing beyond their means in the current financial climate as further increases in the future could plunge them into financial difficulty.
For the time being, however, UK homeowners can breathe easy where the cost of their mortgage is concerned at least.
This week, Halifax bank recorded a monthly drop of 3.1% in property prices, the largest in seven years. Although they were quick to highlight the volatility of their monthly metric, with the long-term outlook highlighting a greater degree of stability, it also portrays a market that is behaving more erratically so far in 2018 than previously expected.
Brexit uncertainty, a subdued level of buyer demand and a lack of variety in terms of housing stock, has seen price growth ebb and flow from month to month. This show of support by the Bank of England to leave interest rates unchanged should bring a well-needed confidence boost to the UK market and should hopefully see market activity stabilise further as the year plays out.
While the recent hike in temperatures received a warm welcome by the British public, an increase in interest rates would have been far tougher to the stomach and UK homeowners will be very glad to see their monthly mortgage payments remain unchanged, for the immediate future at least.
For those renewing their mortgage or indeed taking one out on a two-year fixed deal, just a 0.25% jump could see them out of pocket by more than £1,000 more over that period.
Although rates remain at a very affordable level, even a slight increase could have further dampened the hunger of UK home buyers, and in a misfiring market that is already struggling to whet their appetite, this may have further stunted price growth.
All in all, this latest rate freeze will come as a welcome boost to a market that is acting slightly neurotically at the moment.